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Economy-wide impact of drought induced productivity losses

Nicholas Kilimani (Department of Policy and Development Economics, College of Business and Management Sciences, Makerere University, Kampala, Uganda)
Jan van Heerden (Department of Economics, University of Pretoria, Johannesburg, South Africa)
Heinrich Bohlmann (Department of Economics, University of Pretoria, Johannesburg, South Africa)
Louise Roos (Centre of Policy Studies (CoPS), Victoria University, Melbourne, Australia)

Disaster Prevention and Management

ISSN: 0965-3562

Article publication date: 3 October 2018

Issue publication date: 16 October 2018

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Abstract

Purpose

The purpose of this paper is to investigate how a drought which initially affects agricultural productivity can ultimately affect an entire economy. The study aims to assess the magnitude of the impact as well as highlight key issues that can inform the implementation of drought mitigation programmes.

Design/methodology/approach

The paper presents the literature on the economic impact of drought and uses a computable general equilibrium model where productivity shocks are applied to the agricultural industries following which the resulting impacts on the rest of the sectors of the economy are obtained.

Findings

The findings show that the key macroeconomic variables, namely, real GDP, industry output, employment, the trade balance and household consumption are negatively affected by the drought shock.

Practical implications

The results point to the fact that in the absence of drought mitigation mechanisms, the occurrence of even a short drought as modelled in this paper can impose substantial socioeconomic losses.

Originality/value

First, a general equilibrium framework which uses climate and economic data when evaluating the social-economic impacts of drought is used. Most studies employ partial equilibrium analysis in analysing drought impacts on specific sectors or crops within a limited geographical area. Others use global or multi-regional models which impose averages on the observed impacts. The current study provides valuable insights on the potential damage which droughts can impose on a single economy. This gives a basis for decision making to support drought mitigation policies and programmes.

Keywords

Acknowledgements

This research was undertaken with financial support from the Carnegie Corporation of New York under the Next Generation of African Academics (NGAA II) project, and Economic Research Southern Africa (ERSA). It was part of a wider thesis research theme which led to the award of a Doctor of Philosophy (Economics) degree of the University of Pretoria. All errors and omissions are of the authors’ own.

Citation

Kilimani, N., van Heerden, J., Bohlmann, H. and Roos, L. (2018), "Economy-wide impact of drought induced productivity losses", Disaster Prevention and Management, Vol. 27 No. 5, pp. 636-648. https://doi.org/10.1108/DPM-05-2018-0155

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited