Economy-wide impact of drought induced productivity losses
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Date
2018
Journal Title
Journal ISSN
Volume Title
Publisher
Disaster Prevention and Management: An International Journal
Abstract
The purpose of this paper is to investigate how a drought which initially affects agricultural
productivity can ultimately affect an entire economy. The study aims to assess the magnitude of the impact
as well as highlight key issues that can inform the implementation of drought mitigation programmes.
Design/methodology/approach – The paper presents the literature on the economic impact of drought
and uses a computable general equilibrium model where productivity shocks are applied to the agricultural
industries following which the resulting impacts on the rest of the sectors of the economy are obtained.
Findings – The findings show that the key macroeconomic variables, namely, real GDP, industry output,
employment, the trade balance and household consumption are negatively affected by the drought shock.
Practical implications – The results point to the fact that in the absence of drought mitigation mechanisms,
the occurrence of even a short drought as modelled in this paper can impose substantial socioeconomic losses.
Originality/value – First, a general equilibrium framework which uses climate and economic data when
evaluating the social-economic impacts of drought is used. Most studies employ partial equilibrium analysis
in analysing drought impacts on specific sectors or crops within a limited geographical area. Others use
global or multi-regional models which impose averages on the observed impacts. The current study provides
valuable insights on the potential damage which droughts can impose on a single economy. This gives a basis
for decision making to support drought mitigation policies and programmes.
Description
Keywords
Drought, Environmental change, Water management, Economic impact, Water resources, Climate change impacts, Economics of climate change
Citation
Nicholas Kilimani, Jan van Heerden, Heinrich Bohlmann, Louise Roos, (2018) "Economy-wide impact of drought induced productivity losses", Disaster Prevention and Management: An International Journal, https://doi.org/10.1108/DPM-05-2018-0155