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Climate Change, growth, and Poverty in Ethiopia

Climate change is now a global phenomenon with growth, poverty, food security, and stability implications. Because of significant dependence on the agricultural sector for production, employment, and export revenues, Ethiopia is seriously threatened by climate change, which contributes to frequent drought, flooding, and rising average temperatures. To examine the impact of climate change on agricultural production and to quantify the resulting lost output, this study conducts a time series analysis using country and regional level data. The econometric application on the appropriate production function demonstrates that rainfall significantly explains economic activity. The analysis reveals that Ethiopia has lost a cumulative level of over 13 percent of its current agricultural output between 1991 and 2008. If the current rate of decline in the average annual level of rainfall continues over the medium term, Ethiopia will forgo, on average, more than six percent of each year’s agricultural output. The poverty impact of rainfall variability is enormous. Thus, mitigating and adapting to climate change, though costly, can sustain growth and reduce poverty in the country.