Crops, conflict and climate change

Households in low-income countries depend heavily on agriculture for income and spend a large share
of their budget on food. This dependency on agriculture is even more pronounced among the poorest
households (Banerjee and Duflo, 2010). Consequently, agricultural shocks can have large and highly
uneven impacts on welfare, poverty and inequality. Since agricultural products are traded globally, a
general equilibrium trade model is required to assess how such shocks propagate and impact prices in
different countries. In addition, agrarian households make different consumption and farming decisions
and these choices, which can be adjusted in response to shocks, modulate the impact of price changes
on real incomes. The international trade linkages interact with the heterogeneity in household choices
and together they determine how agricultural shocks reverberate through the income distribution. Yet,
existing trade models typically do not feature detailed household heterogeneity, and have consequently
been largely silent on the distributional consequences of agricultural shocks within countries.
This paper aims to help fill this gap. We develop a discrete choice general equilibrium trade model
of heterogeneous households as producers and consumers. As producers, households allocate their land
and labor endowments to the production of different crops to maximize profits depending on their land
and labor productivity. As consumers, households spend income on crops and products to maximize
non-homothetic utility. Our framework captures household-level heterogeneity in labor income, crop
sales and consumption allocations, similar to Deaton (1997), but with land supply decisions as in
Sotelo (2020) and Costinot, Donaldson, and Smith (2016), and labor supply decisions inspired by
Artuc, Chaudhuri, and McLaren (2010). The model is designed to leverage household survey data to
assess the impacts of agricultural shocks across the entire income distribution, as well as to provide a
more accurate measurement of the aggregation of those impacts relative to representative agent models.
We exploit two major crises with global implications, notably the Russian Federation’s invasion
of Ukraine (and the subsequent war) and climate change, to provide a fine-grained quantification
of the impacts of agricultural shocks on real expenditures in 51 developing countries. For both the
war and climate change shocks, we quantify the average effects on real household expenditures and
the implications for income inequality. We study both shocks to illustrate how different mechanisms
determine how agricultural shocks impact household welfare. The war shock allows us to validate the
model and to highlight how changing prices impact the cost of living. We focus on the impact of war
on third countries through agricultural production and consumption, and the impact of the war on
Ukraine is out of the scope of this paper. The climate change shock alters plot productivity and allows
us to highlight how the income generation channel operates. The latter shock is also used to document
several household-level adaptation mechanisms such as household expenditure adjustments, labor and
land re-allocations and agricultural trade responses.
source :
https://openknowledge.worldbank.org/entities/publication/a27d122e-f315-4db3-a301-d9d9eb34a9cb
Temukan peta dengan kualitas terbaik untuk gambar peta indonesia lengkap dengan provinsi.