that, contrary to its impact on GDP, the impact of ENSO on poverty is small, increasing it by _only_ 0.4 percentage points. An earlier study also found an impact of ENSO on the incidence of poverty (Datt and Hoogeveen, 2003). However, the measure of the shock is not satisfactory since it is reported by the household itself. Yang and Choi (2007) is the closest study to ours. The authors provide evidence that rainfall shocks decrease household expenditures and they also find that remittances are used as insurance: in migrant households, consumption is not impacted by income (where income is instrumented with rainfall shocks), while in non-migrant households, a 10% decrease in income leads to a 5% decrease in consumption. One concern with these estimates, however, is that consumption and income are not comparable in the two surveys they use. In addition, their analysis does not distinguish between urban and rural areas. Our estimates allow more sizable variation of the shock since we use a larger cross-section in rural areas and have 3 rounds of the data, allowing more variation of the shock over time.

As shown by Yang and Choi (2007) with remittances, the distribution of welfare losses associated with weather shocks depends on the determinants of household and community level vulnerability. The geography of the Philippines represents huge challenges in terms of communication, transport and access to social services. These challenges are likely to become more acute with climate change. Understanding the distribution of the impact of rainfall shocks across the regions of the Philippines as well as examining which community or municipality level factors modify the impact of weather shocks plays an important role in designing policies to minimize exposure to and the impact of these shocks.

Hence, we examine the distribution of the impact of weather shocks. The impact of climate change is predicted to differ across the regions of the Philippines, with increased rainfall in the areas of Central Visayas, Southern Tagalog, Luzon, Samar, and the central and western parts of Mindanao while a decrease in rainfall is expected in northern and eastern Mindanao and parts of western Luzon (World Bank, 2010). Given the geography of the Philippines and the high incidence of poverty, well designed and targeted policies necessitate knowledge of the distribution of rainfall impact: both across regions and across the level of income.

A second objective of our study is to shed some light on the types of policies that help communities and households adapt to rainfall shocks. Weather shocks are aggregate shocks by nature, affecting at least a whole community, if not a whole region or country. While there may be variation in the way individual households are affected, depending on the type of activities they conduct or their sources of income, it is important to identify what types of policy-related actions that are associated with a smaller adverse impact at the community and/or at the household level. For example, what are the household and community characteristics that help households mitigate the impact of shocks? Is it better connectivity in terms of better access to communication or transportation networks that link an affected community to other communities less hard hit?<sup>5</sup>

> 5 Datt and Hoogeveen (2003) interact their measure of El Niño shock with community characteristics but do not find any significant effect of infrastructure helping smooth the El Niño shock on household consumption. Their study was conducted using 1998 data. Does their result hold with different and more recent data?

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