Adapting to an aggregate shock: The impact of the Covid-19 crisis on rural households.

ABSTRACT

We examine the response of rural Ugandan households to a large aggregate shock, the Covid-19 pandemic, during and one year after the first lockdown in March 2020. Using 6 rounds of phone surveys from 558 households in western Uganda, we find that household income recovery from the lockdown differs by whether households had a business pre-pandemic. After an initial sharp fall, the incomes of those without a business have recovered to pre-pandemic levels. However, the relatively better-off households with a business before the pandemic still have one-third lower income, due to sustained closure of businesses even after the end of the first lockdown restrictions. Additionally, business-owning households have 30% lower wealth one-year into the pandemic, driven by 44% lower assets, 45% drop in savings, and a 15 fold increase in net-borrowing, suggesting long-term damage. Our findings point to the need to support households who face dwindling finances to fall back on.