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The Economic Effects of Droughts: Focused on Rice Production

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  • Sung, Jaehoon

Abstract

We analyzed the effects of drought on rice production and its economic effects. The results show that rice yields decrease by 3.0% (0.7%) when the number of days of “very severe” (“severe”) drought increases by one. However, we also found that the effects of drought decreased continuously from 2011 to 2015. Specifically, even though the drought in 2015 was more severe than the drought in 2011, the marginal effect of drought on rice yield in 2011 (-0.08%) was larger than that in 2015 (-0.02%). This result reflects the effects of the enhancement of agricultural technologies and the adaptive capacity to drought. An analysis of a regional input-output table shows that the economic losses due to “severe” or “very severe” drought were about 27.6 billion KRW in 2011, 1.1 billion KRW in 2012 and 2014, and 13.2 billion KRW in 2015. Also, we found that the negative economic effects of drought would spread over nearby provinces due to economic linkages among provinces. For example, when crop production in Incheon decreases by 1% due to drought, the total production of Seoul and Gyeonggi province decreases by 0.08% and 0.06% respectively.

Suggested Citation

  • Sung, Jaehoon, 2018. "The Economic Effects of Droughts: Focused on Rice Production," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 41(3), September.
    • Handle: RePEc:ags:jordng:330744
    DOI: 10.22004/ag.econ.330744
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    Resource /Energy Economics and Policy;

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