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General equilibrium effects of public adaptation in agriculture in LDCs: Evidence from Ethiopia

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  • Yalew, Amsalu W.
  • Hirte, Georg
  • Lotze-Campen, Hermann
  • Tscharaktschiew, Stefan

Abstract

Ethiopia is one of the most vulnerable countries to climate change. This is because its important economic sector, agriculture, is virtually rain-fed. The role of the sector in the current economic structure and the potency of the anticipated biophysical impacts of climate change necessitates proactive adaptation in agriculture. This, however, breeds questions of adaptation costs and adaptation finance. This study attempts to derive plausible range of planned adaptation costs in agriculture along with their economy-wide and regional effects in Ethiopia. It also assess the economy-wide and regional effects of the likely options available to a government of a least-developed country to finance adaptation in agriculture. The results show that planned public adaptation in agriculture puts pressure on government surplus, impedes on manufacturing and private services, and GDP of urbanized regions. As such, it may strain the current macroeconomic endeavors of the country which puts government driven structural transformation and reducing fiscal deficit relative to GDP at the center. Government of Ethiopia may reconcile this by laying out incentives to urban agriculture and private investment in agriculture. Besides, foreign support in the form of biotechnology transfer and debt-relief may help to control the side effects of grants on foreign exchange market and trade balance.

Suggested Citation

  • Yalew, Amsalu W. & Hirte, Georg & Lotze-Campen, Hermann & Tscharaktschiew, Stefan, 2017. "General equilibrium effects of public adaptation in agriculture in LDCs: Evidence from Ethiopia," CEPIE Working Papers 11/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
  • Handle: RePEc:zbw:tudcep:1117
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    References listed on IDEAS

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    1. World Bank, 2010. "Economics of Adaptation to Climate Change: Ethiopia, Volume 2. Annexes," World Bank Publications - Reports 13214, The World Bank Group.
    2. David Stifel & Bart Minten & Bethlehem Koru, 2016. "Economic Benefits of Rural Feeder Roads: Evidence from Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 52(9), pages 1335-1356, September.
    3. Thirtle, Colin & Lin, Lin & Piesse, Jenifer, 2003. "The Impact of Research-Led Agricultural Productivity Growth on Poverty Reduction in Africa, Asia and Latin America," World Development, Elsevier, vol. 31(12), pages 1959-1975, December.
    4. Adrian Fenton & Helena Wright & Stavros Afionis & Jouni Paavola & Saleemul Huq, 2014. "Debt relief and financing climate change action," Nature Climate Change, Nature, vol. 4(8), pages 650-653, August.
    5. World Bank, 2010. "Economics of Adaptation to Climate Change : Ethiopia," World Bank Publications - Reports 12504, The World Bank Group.
    6. Barry Smit & Mark Skinner, 2002. "Adaptation options in agriculture to climate change: a typology," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 7(1), pages 85-114, March.
    7. Lulit Mitik & Ermias Engida, 2013. "Public investment in irrigation and training for an agriculture-led development: a CGE approach for Ethiopia," Working Papers MPIA 2013-02, PEP-MPIA.
    8. Jalloh, Abdulai & Nelson, Gerald C. & Roy-Macauley, Harold & Thomas, Timothy S. & Zougmoré, Robert, 2013. "West african agriculture and climate change: A comprehensive analysis:," Issue briefs 75, International Food Policy Research Institute (IFPRI).
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    11. Mitik, Lulit & Engida, Ermias, 2013. "Public investment in irrigation and training for agriculture-led development: a CGE approach for Ethiopia," PEP Working Papers 164417, Partnership for Economic Policy (PEP).
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    Cited by:

    1. Amsalu Woldie Yalew & Georg Hirte & Hermann Lotze-Campen & Stefan Tscharaktschiew, 2018. "Climate Change, Agriculture, and Economic Development in Ethiopia," Sustainability, MDPI, vol. 10(10), pages 1-23, September.
    2. Amsalu Woldie Yalew & Georg Hirte & Hermann Lotze-Campen & Stefan Tscharaktschiew, 2019. "The Synergies and Trade-Offs of Planned Adaptation in Agriculture: a General Equilibrium Analysis for Ethiopia," Economics of Disasters and Climate Change, Springer, vol. 3(3), pages 213-233, October.

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    More about this item

    Keywords

    climate change; agriculture; public adaptation; CGE model; Ethiopia;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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