Distributional Impact Analysis of Climate Variability in Rural Indonesia also be less vulnerable to climatic shocks, to the extent that they protect themselves by adopting low risk and low return strategies that perpetuate their poverty (Rosenzweig and Binswanger 1993).

**Households’ response to shocks can have important effects on both their short and long-term prospects.** Well-developed financial and insurance markets, where they exist, help insulate household consumption from shocks. In developing countries, however, formal financial and insurance markets tend to be limited. As a result, most _ex-ante_ and _ex-post_ strategies for coping with rainfall shocks in poor rural areas are costly, and may lead to lasting reductions in consumption or asset holdings.<sup>4</sup> Rainfall shocks and crop loss can also have pernicious long-term impacts by disrupting human capital investments.<sup>5</sup>

**Past climate shocks have reduced Indonesian households’ human capital investments and income.** For example, early-life drought between 1953 and 1974 adversely affected health, educational attainment, and adult socioeconomic status (Maccini and Yang, 2009). Self-reported crops loss was associated with reduced education expenditure (Cameron and Worswick, 2001). Finally, low rainfall in specific quarters has, in the past, been correlated with substantial and lasting reductions in farmers’ income (Newhouse, 2005).

**We know of no study that has examined the effects of delayed monsoon onset on the welfare of different types of households.** Previous studies have instead focused on estimating the impact of climate variability on aggregate Indonesian rice production **.** This paper fills this gap by investigating the effect of delayed monsoon onset in prior years on farm profits and per capita consumption of rural Indonesian households, separately for poor and rich farm and non-farm households. The timing of the monsoon is an important factor in determining the amount of rice and other crops that can be planted. A key innovation in this study is the use of a large longitudinal household survey, which allows us to separately estimate the effect of delayed onset on groups of households defined on the basis of time-invariant household characteristics, such as initial farm status and average per capita consumption of the household.

**Our primary finding is that on average, households are well protected against delayed onset, but that poor households are vulnerable to temporary falls in consumption.** A one-standard deviation or 24 day delay in monsoon onset the previous year is associated with a 1 percent reduction in household per capita expenditure for all rural households, but a 13 percent reduction for the poorest households. This reduction largely occurs through an increase in household size. However, a one standard-deviation delay in monsoon onset is associated with an 11 percent increase in household per capita expenditure for all rural households, measured two years later, and a 23 percent increase for poor households. These increases are largely due to an increase in total household expenditure. We conclude that delayed onset reduces per capita consumption for poor households, largely through increased household size, but that poor households recover within two years.

> 4 For example, in response to the 1998 financial crisis in Indonesia, households sold non-productive assets such as jewelry (Frankenberg, _et al_ , 2003).

> 5 See Jacoby and Skoufias for India, 1997, Jenson in Cote d’Ivoire, 2000, and Beegle, et al, in Tanzania, 2008, among others.

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