Abstract:
This paper analyzes the economic impacts of climate change-induced adjustments on the performance
of the Tanzanian economy, using a countrywide CGE (computable general equilibrium) model. The general
equilibrium framework enables comparison of the effects of climate change to the overall growth of the
economy because responsiveness to shocks is likely to depend on the macroeconomic structure of the economy.
Effect of overall climate change on agricultural productivity is projected to be relatively limited until
approximately 2030 and become worse thereafter. Our simulation results indicate that, despite the projected
reduction in agricultural productivity, the negative impacts can potentially be quite limited. This is because the
time scales involved and the low starting point of the economy leave ample time for factor substitutability (i.e.,
replacing reduced land productivity with increased use of capital and labor) and increased overall productivity.
This indicates that policies that give farmers opportunity to invest in autonomous climate adaptation, as well as
policies that improve the overall performance of the economy, can be as important for reducing the impacts of
climate change in the economy as direct government policies for climate adaptation. The study results can
inform policymakers when choosing between direct climate-change adaptation policies or measures aimed at
strengthening the fundamentals of the economy, as ways of insulating against external shocks.
