Author:

Keywords:

computable general equilibrium, Ethiopia, rainfall variability, agricultural shocks, climate change in Sub-Saharan Africa, poverty, Science & Technology, Social Sciences, Life Sciences & Biomedicine, Ecology, Economics, Environmental Sciences, Environmental Studies, Environmental Sciences & Ecology, Business & Economics, Computable general equilibrium, Rainfall variability, Agricultural shocks, Climate change in Sub-Saharan Africa, Poverty, INDIRECT ECONOMIC-IMPACTS, CLIMATE-CHANGE, RIVER-BASIN, WATER SECURITY, VARIABILITY, GROWTH, FOOD, DROUGHT, AFRICA, AGRICULTURE, 0502 Environmental Science and Management, 1402 Applied Economics, 1499 Other Economics, Agricultural Economics & Policy, 3103 Ecology, 3801 Applied economics, 3899 Other economics

Abstract:

Analysis of the effects of hydro-climatic variables on economic outcomes helps to inform the design of agricultural and water polices and the economic assessment of climate change impacts. This paper presents an analysis of the multi-sectoral and distributional economic impacts of rainfall shocks in the Awash river basin in Ethiopia. Using novel disaggregated data on crop production, we estimate the direct impacts of rainfall shocks on agriculture and then use a Computable General Equilibrium model to simulate how these rainfall shocks propagate through the wider economy of the basin under three different climate change scenarios. Results are examined by sector and income group. The basin’s economy and expanding agricultural sector are highly vulnerable to the impacts of rainfall shocks. A rainfall decrease scenario could lead to a 5% decline in the basin’s GDP, with agricultural GDP standing to drop by as much as 10%, whilst all sectors benefit from greater rainfall amounts. Distributional impacts depend on location in the basin and type of household, with poor households accruing greater benefits relative to non-poor households under a scenario of additional rainfall and suffering lower income losses under a scenario of rainfall decrease.