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The economic impacts of drought on the economy of Iran: An integration of linear programming and macroeconometric modelling approaches

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  • Salami, Habibollah
  • Shahnooshi, Naser
  • Thomson, Kenneth J.
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    Abstract

    In this paper, we provide economy-wide estimates of the costs of drought in the cropping sector of the Iranian economy, using a linear programming model to estimate the direct costs on agriculture, and a macroeconometric model to trace the indirect impacts on the rest of the economy. The results indicate that a severe drought such as the one that occurred in the crop year 1999-2000 imposes a direct cost of 1605Â million USD, equivalent to 30.3% of the total value added of the cropping sector in Iran. This, in turn, leads to a 12.7% reduction in the value added of other agricultural sub-sectors (livestock, fisheries and forestry). In the rest of the economy, the manufacturing and service sectors experience value added declines of 7.8 and 3.7%, respectively. In addition, there is a substantial decrease in investment in the agricultural, manufacturing and service sectors. Thus, such a drought reduces overall GDP by about 4.4%, and it would also result in decreased non-oil exports, increased food imports, and a rise in inflation. The results of some drought mitigation simulations are reported in brief. Such estimates strengthen the case for increased attention to drought strategies and management in agriculture in Iran and elsewhere.

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    File URL: http://www.sciencedirect.com/science/article/B6VDY-4VFBX4B-1/2/b3daf34449e3d8c79c2f4d80dda0aadc
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    Bibliographic Info

    Article provided by Elsevier in its journal Ecological Economics.

    Volume (Year): 68 (2009)
    Issue (Month): 4 (February)
    Pages: 1032-1039

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    Handle: RePEc:eee:ecolec:v:68:y:2009:i:4:p:1032-1039

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    Web page: http://www.elsevier.com/locate/ecolecon

    Related research

    Keywords: Iran Drought Agriculture Macroeconometric modeling Linear programming;

    References

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    1. Moller Andersen, Frits & Celov, Dmitry & Grinderslev, Dorte & Kazlauskas, Arvydas, 2005. "A macro-econometric model of Lithuania LITMOD," Economic Modelling, Elsevier, vol. 22(4), pages 707-719, July.
    2. Iglesias, Eva & Garrido, Alberto & Gomez-Ramos, Almudena, 2003. "Evaluation of drought management in irrigated areas," Agricultural Economics, Blackwell, vol. 29(2), pages 211-229, October.
    3. Block, Steven A., 1999. "Agriculture and economic growth in Ethiopia: growth multipliers from a four-sector simulation model," Agricultural Economics, Blackwell, vol. 20(3), pages 241-252, May.
    4. Singh, Balwant, 2005. "A forecasting and policy simulation oriented small macro-model for the Indian economy," Journal of Policy Modeling, Elsevier, vol. 27(9), pages 1025-1049, December.
    5. Dreger, Christian & Marcellino, Massimiliano, 2007. "A macroeconometric model for the Euro economy," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 1-13.
    6. Block, Steven A., 1999. "Agriculture and economic growth in Ethiopia: growth multipliers from a four-sector simulation model," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 20(3), May.
    7. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
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    Cited by:
    1. Gil, Marina & Garrido, Alberto & Gómez-Ramos, Almudena, 2011. "Economic analysis of drought risk: An application for irrigated agriculture in Spain," Agricultural Water Management, Elsevier, vol. 98(5), pages 823-833, March.

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