Abstract

The fifth assessment report of the Intergovernmental Panel on Climate Change and several studies suggest that climate change is expected to increase food insecurity and poverty in many parts of the world. In this paper, we adopt a microeconometric approach to empirically estimate the impact of climate change-induced hikes in cereal prices on household welfare in Swaziland (also Kingdom of Eswatini). We do so first by econometrically estimating expenditure and price elasticities of five food groups consumed by households in Swaziland using the Almost Ideal Demand System (AIDS), based on data from the 2009/2010 Swaziland Household Income and Expenditure Survey. Second, we use the estimated expenditure and compensated elasticities from the AIDS model, food shares from the household survey, and food price projections developed by the International Food Policy Research Institute (IFPRI) to estimate the proportionate increase in income required to maintain the level of household utility that would have prevailed absent an increase in food prices. Our results show increases in cereal prices due to climate change are expected to double extreme poverty in urban areas and increase poverty in rural areas of the country to staggering levels - between 71 and 75%, compared to 63% before the price changes. Income transfers of between 17.5 and 25.4% of pre-change expenditures are needed to avoid the welfare losses.

Highlights

  • The fifth assessment report of the Intergovernmental Panel on Climate Change (IPCC 2014) concluded that human interference with the climate system is occurring, and climate changeLusutfu Rd, Mbabane, Eswatini poses risks for human and natural systems alike.1 The 2014 report serves as one of the first efforts by IPCC to present a case for the impact of climate change on poverty

  • Households spend a significant share of their food expenditure on Cereals, 14 To estimate the first and second stage of the Almost Ideal Demand System (AIDS) model, we include several demographic variables of the households in addition to prices: age and gender of the household head, a dummy indicating if the household resides in a rural or urban area, five dummies indicating if the household produces each of the five food categories listed in Table 1, and dummies representing the three of the four regions of Swaziland (Hhohho, Manzini, Shiselweni and Lubombo)

  • Our results show that Swazi households, especially those living in rural areas, could experience a significant deterioration in living standards if the International Food Policy Research Institute (IFPRI)-projected climate scenarios were to materialize

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Summary

Introduction

The fifth assessment report of the Intergovernmental Panel on Climate Change (IPCC 2014) concluded that human interference with the climate system is occurring, and climate changeLusutfu Rd, Mbabane, Eswatini poses risks for human and natural systems alike. The 2014 report serves as one of the first efforts by IPCC to present a case for the impact of climate change on poverty. A review by Hertel and Rosch (2010) of research studies using crop growth simulation models and statistical estimations of climate change effects indicates that rising temperatures are expected to significantly reduce cereal yields in low income countries with an attendant increase in household poverty. In their review of scientific studies about the effects of climate change on food systems, Vermeulen et al (2012) indicate that climate change will slow down poverty reduction gains in developing countries in part by undermining risk mitigation strategies, investments in agriculture, and through increased food prices which disproportionately affect poor households. A special issue in the Journal Environment and Development Economics (Hallegatte et al 2018) was devoted to the topic of poverty and climate change It featured in-depth analyses of the heterogeneous impacts of climate change by income and exposure to environmental shocks at the household level. The Kingdom has six physiographic zones grouped by elevation, geology, landforms, soils, and vegetation

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