ECONOMIC IMPACT OF DROUGHTS ON SECTORAL OUTCOMES IN AFRICAN COUNTRIES

Abstract

Abstract:
Drought as an event exhausts the availability of water use as an input of production in
agricultural activities, and reduce labor productivity through hunger and starvation;
which has a potential economic spillover beyond agricultural sector to other economic
sectors of the economy, based on interconnectedness of sectors and regions.Droughtinduced
water deciency affects production operations in other sectors of an economy
apart from agricultural sector; since water availability is characterized by pervasive
spillovers effects i.e. the use by one group or region affects the water availability and
security of others. This study investigates the economic impact of droughts on sectorial
output in African countries. The study use Generalized Method of Moment's panel
estimator and reported both one-step and two-step results. Dynamic GMM was use for
estimation and system GMM was use for robustness. The dataset for the study was
between the periods of 1979-2014 for 44 African countries. The results show that
drought reduces both agricultural and manufacturing output in African countries. Hence,
African governments must look into the inter-linkage between this this sectors in designing
policies to mitigate the impact of this disasters.