Every cloud has a silver lining: Winners and losers from droughts
Year: 2024
Type: article
Abstract: The paper aims to analyse the socioeconomic impacts of the 2022 drought on Italian agriculture, focusing on its distributive effects either from the sectoral or the regional perspective. A methodology based on consumer surplus theory was adopted. This allowed for identifying and quantifying impacts in terms of overall well-being for two different stakeholders: farmers and consumers. The change in well-being recorded for each is determined by the sum of two significant effects: the "price effect” and the "quantity effect”. Interestingly, while consumers suffered economic losses due to the 2022 drought (“losers”), most farmers, thanks to the "price" effect, not only did not lose but gained (“winners”). Demand elasticity is affecting the patterns of distribution. Our results challenge a simplistic understanding of the economic effects of droughts and have numerous implications for policy. • We use the analysis of consumers' and producers' surplus to investigate the distributive effects of a drought in agriculture. • Changes in welfare recorded for each of them is determined by the sum of two effects: price and quantity effect. • The price effect may enable farmers to shift a significant part of the economic burden onto downstream operators and consumers. • Depending on demand elasticity, the most important explanatory cause, the shift could be lower or higher than 100%. • Farmers on aggregate won, but significant differences arise according to geographical location and crop.
Institutions: Bocconi University, University of Udine
Language: English
Subfield: Soil Science
Domain: Life Sciences
Open Access status: hybrid
Estimated APC paid: $3,850
OpenAlex ID: W4403929705