Households in developing countries are exposed to increasingly extreme weather events that could endanger their prosperity. This study examines the impact of the unusually cold, snowy winter of 2009/2010 on the livestock of Mongolian households. Livestock represents on average more than 90 percent of the value of all assets owned. It is essential for current consumption and—due to the insufficient financial infrastructure—the most important means to provide for the future. The econometric analysis is based on three waves of a household panel survey that the German Institute for Economic Research carried out in collaboration with the National Statistical Office of Mongolia two to five years after the extreme event. The extremely hard winter dramatically depleted the livestock of rural herder households. Many of those affected stopped herding as a result of the extreme winter, settling in cities to earn their wages as hired hands—which in turn had a negative impact on their wealth. Even five years after the event, severely affected households that continued to herd animals recorded lower herd growth than those that were moderately affected, likely increasing inequality further in the future. The findings show that extreme weather events have long-term negative consequences on households and underscore the need for systematic aid for those affected.
Keywords: Assets, extreme weather events, growth rates, post-shock recovery, Mongolia