Download climate change-RW200.. - University of Mauritius

Climate Change, Poverty
and Economic Growth in
Africa
Dr Verena Tandrayen-Ragoobur
Department of Economics and Statistics
University of Mauritius
and
Dr Vishal Ragoobur
Mauritius Employers Federation
Presentation Outline
► Introduction
► Aims
and Objectives
► Theoretical Background
► Empirical Evidence
► Data Source
► Data Analysis
► Methodology
► Results
► Conclusion and Future Research
2
Introduction
► Climate
change is an issue for the world
economy.
► But
it is a major challenge for poor
economies, in particular.
► Today,
it is the poor who are mostly affected
► Tomorrow
warming
we will all face the risks of global
3
Introduction
► Climate
disasters are heavily concentrated
in poor countries.
► From
2000-2004, some 206 million people
were affected annually by climate change.
► Over
98% of them are from developing
countries
4
Africa is the most vulnerable
continent of the world (IPCC, 2007)
Africa will
experience
severe
impacts
due to
climate
change
Africa has
the lowest
capacity
to adapt
to climate
change
Africa is
the most
vulnerable
continent
of the
globe
5
AND MALARIA
CONFLICTS AND
INSECURITY
WATER CRISIS
6
Objectives
► Analyse
climate change in Africa through
the occurrence of natural disasters
► Examine
the impact of climate change on
economic growth in Africa
► As
climate change has wide ranging effects
– we focus on agricultural output (food
security) and foreign direct investment
7
Theoretical Review
► Possible
Positive Impact of Climate Change
on Growth
► Aghion
and Howitt (1998) -Schumpeterian model –
growth is generated by technological change
arising from capital replacement after the disaster.
► Albala-Bertrand
(1993a) – macroeconomic
indicators improved during the years following the
disaster, then returned to their normal level
8
Theoretical Review
Negative Impact - Transmission Mechanisms
► Benson
and Clay (2004) provide a number
of channels via which natural hazards
influence growth path
 Fall in stock of capital and human resources –
via migration and deaths
 Increased spending leads to high fiscal deficits
and inflation
9
Theoretical Review

Reallocation of expenditures reduces planned
investment

Repair and recovery financed by aid – additional
commitments imposed by donor countries

Consecutive natural disasters create an
atmosphere of uncertainty that discourages
foreign investors
10
Theoretical Review
► Miguel
et al. (2004) – increase the risk of
civil war and political instability
► Cochrane
(1994) – rise in countries’
indebtedness
 Use a Keynesian growth model and assume that
recovery costs are funded by external borrowing
 Increase in ROI, rise in debt stock causing a fall
in investment and growth
11
Empirical Evidence
Macroeconomic Studies
► Albala-Bertrand
(1993b) – no impact of natural
disasters on long term growth
► Benson
(2003) - average growth was lower in
countries that experienced more natural disasters
► IPCC
(2007) – ocean fisheries, fresh water access,
migration and tourism
12
Empirical Evidence
► Much
research focus on agriculture (Adams et al.
1990; Deschenes and Greenstone 2007; Guiteras
2007)
► On
mortality (Curriero et al. 2002; Deschenes and
Greenstone 2007; Deschenes and Moretti 2007)
► On
crime (Field 1992; Jacob et al. 2007)
► On
conflict (Miguel et al. 2004)
13
Empirical Evidence
Microeconomic Studies
► Alderman
et al. (2004) – Zimbabwechildren between 12 – 24 months during the
1982-84 drought had a higher probability of
being stunted (sign of malnutrition) during
their preschool years than other children.
► Elbers
and Gunning (2003) – reduction in
capital stock - Zimbabwe
14
Data Source
► Data
on macroeconomic variables was
obtained from the World Bank Development
Indicators 2007
► Data
on Natural Disasters is from ‘EM-DAT:
Emergency Events Database: The
OFDA/CRED International Disaster
Database’ – Universite Catholique de
Louvain – Brussels - Belgium
15
Data Analysis
► Data
►A
is collected for the African Continent
sample of 47 countries
► Time
Frame: 1960 – 2006
► Panel
Data Analysis
16
Prevalence of Natural Disasters across Africa
400
Natural Disasters
350
300
250
200
150
100
50
0
19001929
19301959
19601969
19701979
19801989
19901999
20002008
Year
Eastern Africa
Middle Africa
Northern Africa
17
Southern Africa
western Africa
Methodology
► Variables:
 Dependent Variable
►GDP
Growth
►Agricultural
Value Added as a share of GDP
 Explanatory Variables
►
►
►
►
►
Gross Domestic Investment as a share of GDP
FDI as a share of GDP
Trade as a share of GDP - Openness measure
Foreign aid as a share of GDP
Debt as a share of GDP
18
Methodology
► Variables:
► Population
growth
► Industry value added as a share of GDP
► Agriculture value added as a share of GDP
► Agricultural land as a % of total land area
► Time dummies
► Main
Variable:
► Climate
change measured by the number of natural
disasters
19
Methodology
► Stata
9.0 is used for estimation
► Panel
data technique is applied. We used
the fixed effect estimation method.
20
Econometric Specification
GDP Growth Equation
GDPG ct   0   1 AgrVAct   2 IndVAct   3GDINV ct   4Tradect 
 5 FDIGDPct   6 Popct  7 AidGDPct   8 AidGDPct2 
 9 DebtGDPct   10Climatect   11TimeDummie s  1ct
Agricultural Production Equation
AgriPct  0  1 AgrLand ct  2 IndVAct  3GDINV ct   4Tradect 
5 FDIGDPct  6 Popct  7 AidGDPct 
8 Climatect  9TimeDummie s  1ct
21
Results
Table 1:GDP Growth
Obs.=1308
Variables
AgriVA
Coefficients
0.124***
GDInv
AidGDP
AidGDP2
DebtGDP
0.194***
0.278***
-0.382***
-0.031***
(7.52)
(5.08)
(5.10)
(5.52)
IndVA
Pop
Trade
0.098***
0.898***
0.027*
(2.99)
(4.56)
(1.77)
FDIGDP
Climate
Time Dummies
0.075**
-0.169

(2.31)
(1.19)
R2=0.2
Absolute t-stats
(3.57)
22
Results
Table 2:GDP Growth
Obs. = 1201
Variables
AgriVA
Coefficients
0.097***
Absolute t-stats
(2.63)
GDInv
AidGDP
AidGDP2
DebtGDP
0.198***
0.258***
-0.365***
-0.029***
(7.07)
(4.24)
(4.52)
(4.68)
IndVA
Pop
Trade
0.123***
0.897***
0.022
(3.36)
(4.39)
(1.30)
FDIGDP
Climate (Co2 Emi)
Time Dummies
0.078**
-0.173

(2.25)
(0.77)
R2=0.19
23
Results
Table 3:GDP Growth
Obs.= 1308
Variables
AgriVA
GDInv
AidGDP
Coefficients
0.126***
0.189***
0.281***
Absolute t-stats
(3.61)
(7.30)
(5.14)
AidGDP2
DebtGDP
IndVA
-0.387***
-0.031***
0.106***
(5.16)
(5.48)
(3.19)
Pop
Trade
0.896***
0.027*
(4.56)
(1.75)
FDIGDP
0.049**
(1.34)
Climate
Climate*FDIGDP
Time Dummies
-0.040
-0.040*

(0.25)
(1.70)
R2=0.19
24
Results
Table 4:Agricultural Output Obs.=1299
Variables
Coefficients
Absolute t-stats
0.087*
(1.72)
GDInv
-0.168***
(7.78)
AidGDP
-0.004
(0.17)
-0.556***
(24.38)
-0.0000016***
(4.99)
Trade
0.040***
(3.07)
FDIGDP
0.098***
(3.38)
Climate
-0.195*
(1.65)

R2=0.455
Agricultural Land
IndVA
Pop
Time Dummies
25
Conclusion
► Climate
change is different from other
problems
► It
challenges us to think differently at many
levels
► It
challenges us to think about what it
means to live as part of an ecologically
interdependent human community
26
Future Work
► Testing
the other transmission mechanisms
► Using
data on air temperature and
precipitation as a measure of climate
change
►A
negative impact of climate change on
growth is normally observed in the ST
► But
MT and LT impacts are still subject to
debate – Use of dynamic panel
► What
about Mauritius?
27
Thank You