Impact of Natural Hazards on Agricultural Economy and Food Production in China: Based on a General Equilibrium Analysis

Based on a standard general equilibrium model for China’s macro economy with multi-regional sectors, including water, croplands, agricultural labor and rural households, this study estimated the impact on the agricultural economy and food production from natural hazards in 2007 and considered two simulations- i) the drought-exempt case, which supposed that a drought did not occur; ii) the flood-exempt case, which supposed that a flood did not occur. The discussion focuses on the results obtained from the drought-exempt case, which was similar to but more significant than the flood-exempt case, because the drought in 2007 was the most widespread in recent years and was also more serious than the flood. In both cases, real GDP obtained insignificant positive effects contributed by the rise of agricultural output, but the effects on nominal GDP was negative. All agricultural productions increased their outputs and exports, especially for sorghum, oil seed and corn. Another finding was that more capital and less labor were related to most crop productions. All food productions also increased their outputs and exports, thus their energy inputs increased, especially for sugar, meats and vegetables. Households benefited from lower prices for all agricultural and food products from more domestic outputs and fewer imports. However, more food consumption and higher welfare occurred in urban households rather than in rural households. This was due to the declines in the returns of cropland and in the wages of agricultural labor. The worst rural households were located in Shandong, Henan, Hebei, Yunnan, Anhui, and Heilongjiang.