Long-term Consequences of Droughts in Brazil

It is well-documented that droughts can have a severe impact on the welfare of rural households in devel-oping countries. We find there is long-term damage far beyond the immediate impact of the drought with affected households taking a decade to catch up with their peers. Our findings are robust to the specification of the drought and the assumed time-frame of the impact. Upon stratifying by wealth, the results indicate that the lowest twenty-five percent and middle fifty percent income households are most affected by droughts. Designers of emergency relief and drought-mitigation policies will benefit from future investigation into the causes of pervasive, drought-induced income losses