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Economic effects of climate change in developing countries: Economy-wide and regional analysis for Ethiopia

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  • Yalew, Amsalu W.
  • Hirte, Georg
  • Lotze-Campen, Hermann
  • Tscharaktschiew, Stefan

Abstract

Quantifying the economic effects of climate change is a crucial step for planning adaptation in developing countries. This study assesses the economy-wide and regional effects of climate change induced productivity and labor supply shocks in agriculture in Ethiopia. The study shows, in worst case scenario, the effects on national GDP may add up to -8% with uneven regional effects ranging from -10% in agrarian regions (e.g. Amhara) to +2.5% in urbanized regions (e.g. Addis Ababa). Cost-free exogenous structural change scenarios in labor markets and transaction costs may offset about 20-30% of the ripple effects of climate change. Therefore, the ongoing structural transformation in the country may underpin the resilience of the economy to climate change. Nevertheless, given the role of agriculture in the current economic structure of the country and the potency of biophysical impacts of climate change, adaptation in the sector is indispensable. Otherwise, climate change may hamper economic progress of the country, and make rural livelihood unpredictable.

Suggested Citation

  • Yalew, Amsalu W. & Hirte, Georg & Lotze-Campen, Hermann & Tscharaktschiew, Stefan, 2017. "Economic effects of climate change in developing countries: Economy-wide and regional analysis for Ethiopia," CEPIE Working Papers 10/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    • Handle: RePEc:zbw:tudcep:1017
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    Cited by:

    1. Melese Mulu Baylie & Csaba Fogarassy, 2022. "Decision Analysis of the Adaptation of Households to Extreme Floods Using an Extended Protection Motivation Framework—A Case Study from Ethiopia," Land, MDPI, vol. 11(10), pages 1-20, October.
    2. Yalew, Amsalu W. & Hirte, Georg & Lotze-Campen, Hermann & Tscharaktschiew, Stefan, 2017. "General equilibrium effects of public adaptation in agriculture in LDCs: Evidence from Ethiopia," CEPIE Working Papers 11/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    3. Daregot Berihun & Passel Steven, 2022. "Climate variability and macroeconomic output in Ethiopia: the analysis of nexus and impact via asymmetric autoregressive distributive lag cointegration method," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(3), pages 4064-4087, March.
    4. Amsalu Woldie Yalew & Georg Hirte & Hermann Lotze-Campen & Stefan Tscharaktschiew, 2018. "Climate Change, Agriculture, and Economic Development in Ethiopia," Sustainability, MDPI, vol. 10(10), pages 1-23, September.
    5. Titay Zeleke & Fekadu Beyene & Temesgen Deressa & Jemal Yousuf & Temesgen Kebede, 2021. "Vulnerability of Smallholder Farmers to Climate Change-Induced Shocks in East Hararghe Zone, Ethiopia," Sustainability, MDPI, vol. 13(4), pages 1-19, February.
    6. Melese Mulu Baylie & Csaba Fogarassy, 2021. "Examining the Economic Impacts of Climate Change on Net Crop Income in the Ethiopian Nile Basin: A Ricardian Fixed Effect Approach," Sustainability, MDPI, vol. 13(13), pages 1-16, June.

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    More about this item

    Keywords

    climate change; agriculture; migration; CGE model; Ethiopia;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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