Economy-Wide Effects of Climate Change in Benin: An Applied General Equilibrium Analysis

This research analyzes the economic effects of climate change-induced crop yield losses in Benin. As agriculture is a large sector in Benin, the climate change-induced crop yield losses are expected to affect the entire economy as well as household welfare in both rural and urban areas. The paper applies a dynamic general equilibrium model and simulates productivity shocks in the agricultural sector derived from climate change scenarios for Benin. The findings show that climate change-induced crop yield losses reduce domestic agricultural outputs by 4.4% and the nonagricultural output by 0.9% on average by 2025. While export supply decrease by 25.5%, import demand increases by 4.9% on average by 2025. As price of labour and capital decline, household income drop for all household groups by 2.5% on average. Ultimately, household welfare decline for all household groups by 2.7% on average. Rural and particularly poor households are projected to experience the worst adverse effects of climate change-induced crop yield losses. The results show that without adaptive strategies to cope with climate change, economic growth and household welfare will decline even further by 2035 and 2045. Subsequently, the paper suggests that adaptation strategies are needed not only at the national level to overcome the projected negative effects on macroeconomic indicators, but also at household level to enhance the adaptative capacity of households, especially the poor households living in rural areas.