Impacts of Droughts on Economic Activities in The São Paulo Metropolitan Area

Karina Simone Sass (), Eduardo Haddad and Eduardo Mario Mendiondo ()
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Karina Simone Sass: Departamento de Economia, Universidade de São Paulo
Eduardo Mario Mendiondo: Sao Carlos School of Engineering, University of Sao Paulo

No 4-2023, TD NEREUS from Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS)

Abstract: Droughts can lead to severe socioeconomic impacts on cities by affecting industrial production, food and energy price, and income. Given that the frequency and intensity of this climatic event are increasing because of climate change, assessing the vulnerability of economic activities to drought is essential to develop adaptation strategies. This study explores the economic effects of droughts on the São Paulo Metropolitan Area (SPMA), a region with a high concentration of people and economic activities and frequently hit by droughts. Our method comprises an integrated system of analysis that puts together climatic and economic databases. The integrated modeling system is divided into three steps: i) calculate a variable to represent drought conditions; ii) estimate the direct impact of droughts on sectoral activities through an econometric model; and iii) estimate the total impact on the economy through a Spatial Computable General Equilibrium (SCGE) model calibrated with municipal data. The econometric model results showed that energy and water-intensive industries are more sensitive to droughts in the SPMA. The results from the simulations in the SCGE model showed that the impact on these sectors could spread to the entire economy, indirectly affecting activities such as land transport, construction, and personal services and decreasing the total production and disposable income of metropolitan municipalities.

Keywords: local droughts impact; industrial activity; regional analysis; integrated modeling (search for similar items in EconPapers)
JEL-codes: C68 R10 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2023-03-30
New Economics Papers: this item is included in nep-agr, nep-env, nep-geo and nep-ure
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