El Niño and Firms: Impact on Food and Beverages Manufacturing Firms in Ethiopia

Research Note
Published on 7 November 2023


This research note examines the effect of the extreme drought, which is caused by El Niño on firms’ performance in food and beverage manufacturing sector in Ethiopia. Combining panel data of Ethiopia Manufacturing Firms, remote sensed data on rainfall from Climate Hazards Group InfraRed Precipitation with Station (CHIRPS) data, and survey, we build a district - level measure of El Niño exposure and use within district variation over time to employe difference-in-difference estimation. We find that El Niño exposure decreases firms’ performance in terms of sales, employment, total factor, and labor productivity. The finding was robust to different model specifications. We identify shortage of domestic-sourced raw materials as a main channel: El Niño drought shock reduces the availability of domestic raw material.


Yohannes Ayele

University of Sussex

Habtamu Edjigu

World Bank

Solomon Zena Walelign

University of California, Berkeley