However, these papers have considered the average impact and have not examined the timing of these effects and how the price impacts vary throughout the year. As the analyses conducted in this study show, the impact of these shocks is highly seasonal.

We match monthly data on retail prices of six staple cereals (teff, wheat, maize, sorghum, barley, and African millet) and wages of unskilled laborers in 82 markets over 17 years to data on district level annual growing season rainfall.

We find that the impact of the weather shock on grain prices is largest immediately following harvest in January. On average a 1 in 5-year moderate drought caused grain prices from January to May to increase by 9 percent. From May to October the impact of the rainfall shock on grain prices gradually decreases. During the lean season prior to the new harvest becoming available the impact of a moderate drought on grain prices is much lower at 3 percent. The sudden increase in prices at harvest time and the lack of inflationary impacts during the lean season is somewhat counter to commonly held views where the concern is around price increases during a prolonged lean season, not price increases at harvest time itself.

In contrast, unskilled nominal wages are not significantly impacted by weather shocks, implying that the real value of wages falls in the immediate aftermath of harvest when food prices rise. This is contrary to what has been found in India (Jayachandran 2006).

In addition to providing a robust estimate of the magnitude and timing of the impact of drought on local grain prices, we also examine whether this has changed over time. Ethiopia has experienced a prolonged period of particularly fast development in the timeframe of this study. As part of this development, it invested significantly in roads, basic services, agricultural extension and a rural safety net to respond to drought. The federal and regional road network increased from 26,500 km in 1997 to 100,000 km in 2015 (World Bank, 2016) and this occurred at the same time as mobile phone expansion, both of which contributed substantially to better market integration (Minten _et al.,_ 2014). In 2005, it established one of the largest safety net programs in Sub-Saharan Africa—the Productive Safety Net Program (PSNP)—aimed at addressing food insecurity in the historically drought-prone parts of the country.<sup>3</sup> Although household incomes have remained predominantly agrarian, significant agricultural growth and modernization have been experienced by many (Bachewe _et al_ ., 2015). For a number of reasons then we may not expect drought to have the same impact on local prices in 2013 as in 1997. Indeed, we find that the impact of weather shocks on grain prices was more than three times larger prior to 2005 than after. In places where infrastructure investments have been high, drought has almost no inflationary impact post 2005.

Changes in infrastructure over time have been widespread across all parts of the country. It is not clear however that it is infrastructure investments that have driven the change in the impact of weather on prices as infrastructure investments have been non-random. There has also been attenuation in areas where road improvements were lower. Attenuation could have been driven by

> 3 The PSNP has a very wide coverage. In 2010, for example, a total 7.4 million Ethiopians in nine regions were targeted to receive benefits. Of these, 1.3 million received cash only and 3.3 million received food only. The remaining 2.8 million received a combination of cash and food transfers (MOARD, 2010).  The program uses both administrative and community targeting approaches. The national targeting guidelines, which aim to guarantee timely and adequate transfers to the most food insecure people, allowed for regional and local adaptation (Sharp, 2006).

3