Nexus between climatic extremes and household expenditures in rural Bangladesh: a nationally representative panel data analysis

Bangladesh is a country recognized as “ground zero” in terms of vulnerability due to human-induced climate change, for which it bears the brunt of extreme climatic events. In addition, the number of extreme events is disconcertingly increasing nowadays and, jeopardizing its people, particularly in the southern (cyclone-prone), north-western (drought-prone), and east-northern and central (flood-prone) regions by causing instability and a reduction in sources of income for households, which in turn affects household expenditures. To this end, our study sought to determine the nexus between extreme climatic events and household welfare. For this, we adopted pooled OLS (Ordinary Least Square), fixed effects, and random effects models using three (2011–2012, 2015, and 2018–2019) wave nationally representative data sets of the Bangladesh Integrated Household Survey (BIHS) from rural Bangladesh. The results revealed that climate extremes affect household well-being. Superficially, the fixed effects model (most efficient) showed that climatic extremes led to a 3% decrease in average household expenditures. Moreover, negative coefficients were found for household food and non-food expenditures. Therefore, we propose several policy changes as part of adaptation and mitigation strategies to counter the negative impacts of extreme climate events. These include–income diversification through the creation of off-farm income generating activities (IGAs), an emphasis on sustained technology innovations under the changing climatic conditions, and variety development to tailor solutions to regions suffering from increased saline, droughts, and floods.