Drought shocks and farm household consumption behaviour: Insights from Fars province of Iran

Drought is one of the most important shocks that has affected many farm households in rural Iran. This paper presents cross-sectional quantitative research with a micro-level analysis of the impacts of drought shocks on food and non-food expenditures of smallholders in rural Iran. Quantile regression model was applied to analyse the data obtained from 300 small farmers in the county of Marvdasht in Fars province, Iran. The results show that households who experience moderate and severe drought, apply a combination of different strategies, which are usually used to deal with idiosyncratic shocks and covariate shocks. A reduction in consumption expenditures is not the only and the first choice coping strategy but is one of the main strategies used by most drought-affected households. Our results further indicate that the non-food expenditures of smallholders in severe drought-affected villages are negatively affected by drought, however, food expenditures are not significantly affected. Non-food expenditures of households with overall lower consumption level were significantly affected. These findings point out the importance of the provision of compensation schemes for smallholders and the designing and implementation of coping mechanisms including non-agricultural job opportunities in drought-affected areas of Fars, Iran. • Analyzes the impact of drought shocks on farm household food and non-food expenditures in Fars, Iran. • Reduction in consumption expenditures is one of the main strategies used by most drought-affected households. • Smallholders in severe drought-affected areas decrease spending on non-food items while ensuring their food expenditures. • Highlights the policy importance of providing off-farm employment in drought-affected rural Iran.