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Climate change has become one of the most important development challenges worldwide. It affects various sectors, with agriculture the most vulnerable. In Ethiopia…
Climate change has become one of the most important development challenges worldwide. It affects various sectors, with agriculture the most vulnerable. In Ethiopia, climate change impacts are exacerbated due to the economy’s heavy dependence on agriculture. The Ethiopian Government has started to implement its climate-resilient green economy (CRGE) strategy and reduce CO2 emissions. Therefore, the purpose of this study is to examine the impact of CO2 emission on agricultural productivity and household welfare.
This study aims to fill these significant research and knowledge gaps using a recursive dynamic computable general equilibrium model to investigate CO2 emissions’ impact on agricultural performance and household welfare.
The results indicate that CO2 emissions negatively affect agricultural productivity and household welfare. Compared to the baseline, real agricultural gross domestic product is projected to be 4.5% lower in the 2020s under a no-CRGE scenario. Specifically, CO2 emissions lead to a decrease in the production of traded and non-traded crops, but not livestock. Emissions also worsen the welfare of all segments of households, where the most vulnerable groups are the rural-poor households.
The debate in the area is not derived from a rigorous analysis and holistic economy-wide approach. Therefore, the paper fills this gap and is original by value and examines these issues methodically.
The Ethiopian economy is characterized by erratic and poor performance with negative growth rates, seven times over the period 1981-2010. This trapped per capita income at…
The Ethiopian economy is characterized by erratic and poor performance with negative growth rates, seven times over the period 1981-2010. This trapped per capita income at 358 USD in 2010 staying far away from middle-income country status. A lot of unsolved debates regarding perpetual growth, structural change and sectoral allocation of resource emerged overtime. The purpose of this paper is to examine the alternative effects of induced sectoral total factor productivity and makes comparisons of various sectoral growth options.
This study uses a recursive dynamic computable general equilibrium model based on neoclassical-structuralist thought. It also calibrates coefficients that capture the impacts of openness, imported capital and liberalization on sectoral total factor productivity growth using a model of vector auto-regressive with exogenous variables.
Future economic growth rate is expected to grow at a declining trend and to be dominated by the service sector. If it keeps growing on the current path it will expose the economy to a severe structural change burden problem. Openness induced agricultural total factor productivity highly improves the welfare of households while imported capital goods induced industrial total factor productivity is also better in fostering structural change of the economy. The broad-based growth option that combines the induced total factor productivity of all sectors also enables the economy to achieve more sustainable growth, rapid structural change and welfare gain at the same time.
There are intensive and charged debates regarding alternative sectoral growth options. However, the debate does not derive from a rigorous analysis and holistic economy-wide approach. It is rather affiliated with politics. Therefore, the paper is original and investigates these issues meticulously.