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Climate Change, Agriculture, and Economic Development in Ethiopia

Amsalu Woldie Yalew (), Georg Hirte (), Hermann Lotze-Campen () and Stefan Tscharaktschiew ()
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Hermann Lotze-Campen: Potsdam Institute for Climate Impact Research (PIK), Member of the Leibniz Association, P.O. Box 601203, 14412 Potsdam, Germany
Stefan Tscharaktschiew: Institute of Transport and Economics, Technische Universität Dresden, 01062 Dresden, Germany

Sustainability, 2018, vol. 10, issue 10, 1-23

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 Ethiopian agriculture. We pursue a structural approach that blends biophysical and economic models. We consider different crop yield projections and add a regionalization to the country-wide CGE results. The study shows, in the worst case scenario, the effects on country-wide GDP may add up to −8%. The effects on regional value-added GDP are uneven and range from −10% to +2.5%. However, plausible cost-free exogenous structural change scenarios in labor skills and marketing margins may offset about 20–30% of these general equilibrium effects. As such, the ongoing structural transformation in the country may underpin the resilience of the economy to climate change. This can be regarded as a co-benefit of structural change in the country. Nevertheless, given the role of the sector in the current economic structure and the potency of the projected biophysical impacts, adaptation in agriculture is imperative. Otherwise, climate change may make rural livelihoods unpredictable and strain the country’s economic progress.

Keywords: climate change; agriculture; migration; structural change; CGE model; Ethiopia (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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