Sustainable Agri-Food Systems: Climate Change, Food Prices, and Macroeconomic Dynamics
by Xiaoke Zhu
Date of Examination:2025-02-28
Date of issue:2025-04-24
Advisor:Prof. Ph.D. Xiaohua Yu
Referee:Prof. Dr. Andreas Fuchs
Referee:Prof. Dr. Bernhard Brümmer
Persistent Address:
http://dx.doi.org/10.53846/goediss-11233
Files in this item
Name:Sustainable Agri‐Food Systems.pdf
Size:5.60Mb
Format:PDF
The following license files are associated with this item:
Abstract
English
Agri-food systems are integral to achieving at least 12 of the 17 Sustainable Development Goals (SDGs). Nevertheless, agri-food systems are both a victim of and contributor to climate change. A comprehensive understanding of climate-induced welfare losses, the factors shaping low-carbon transitions, and the effects of emissions abatement within agri-food systems is crucial for developing sustainable agri-food systems. In light of this, we first evaluate the impacts of extreme heat on wage losses in the Chinese agri-food industry. We then identify the key factors influencing cooking fuel transitions in rural China using machine learning algorithms. Based on the Dynamic Stochastic General Equilibrium (DSGE) model, we further investigate the macroeconomic effects of implementing a food carbon tax and abolishing the agricultural diesel subsidy. Finally, we evaluate the impact of food price fluctuations resulting from exogenous shocks on macroeconomic dynamics. By adopting plausibly exogenous year-to-year temperature variations, the first topic reveals that extreme heat is associated with a decrease in worker wages and that these welfare losses can be attributed to the adverse impacts of extremely hot days on worker productivity. We also observe that, compared to male workers, female workers are more likely to bear wage losses when exposed to extremely hot weather. Furthermore, workers in private firms may experience more wage losses due to extremely hot days than those in other ownership types. In the long term, wage losses induced by climate change are projected to rise by 10.93% under RCP8.5, if no extra adaptation actions are implemented. The second topic leverages machine learning algorithms to predict cooking fuel transitions in rural China. Our analysis reveals that the random forest algorithm achieves superior prediction accuracy compared to alternative models. Overall, we find that environmental and geospatial predictors, obtained from remote sensing data, demonstrate considerable potential in predicting cooking fuel transitions, in contrast to traditional socioeconomic predictors. Notably, we identify rural income and nighttime light intensity as the two most critical factors affecting these transitions. Furthermore, under a positive shock of 75% to both average rural income and nighttime light intensity, the usage rate of non-solid cooking fuels increases by around 70% and 29%, respectively, with this effect being particularly pronounced in China’s developing regions. The third topic investigates the effects of a food carbon tax on macroeconomic dynamics in China by employing a quantitative DSGE model with nominal price rigidities. Our simulation results indicate that a food carbon tax shock would trigger a recession and inflation, accompanied by a decline in aggregate consumption and employment. Food security could deteriorate due to the rising food consumption costs and declining agricultural growth induced by the food carbon tax shock. Furthermore, flexible food prices and increasing consumption substitution elasticity would amplify the macroeconomic effects of the food carbon tax. A careful trade-off between carbon tax and macroeconomic stability, a transition in food consumption structure, and adjustments in monetary policy could mitigate the adverse effects of the shock. The fourth topic develops a heterogeneous DSGE model incorporating both agricultural and non-agricultural sectors to simulate the potential macroeconomic effects of abolishing the agricultural diesel subsidy in Germany. Our impulse results reveal that the extensive and intensive margins of diesel demand would decrease by 8.0% and 7.2%, respectively, following the abolition of diesel subsidies. Furthermore, the costs of diesel inputs would increase by approximately 4.6%, accompanied by a 0.76% decline in agricultural outputs. Despite the modest macroeconomic responses (e.g., GDP, aggregate consumption, and inflation) to the policy, its impact could be amplified in the context of the Russia-Ukraine conflict. The final topic evaluates the impact of food price fluctuations caused by exogenous shocks on macroeconomic dynamics in the United States. Calibration and Bayesian estimation methods are employed to acquire the parameters involved in this model. Our findings indicate that a 10% surge in food prices would magnify the adverse macroeconomic effects compared to a 2% increase in food prices. Importantly, a quarter of headline inflation in the “5C” era can be attributed to food price increases. Furthermore, food price shocks lead to a reduction in real GDP and aggregate consumption. Finally, a higher labor substitution parameter and lower consumption substitution elasticity would amplify the recession in the “5C” era. A moderate monetary policy can mitigate the decline in real GDP and consumption caused by higher food prices, but may exacerbate inflation. Based on these findings, this dissertation generates several policy implications as follows. First, there is an essential role for the government in preventing workers, especially females, from experiencing welfare losses caused by extreme heat. This study provides evidence for the government to establish high-temperature subsidy standards for workers. Second, we reveal the primary factors driving cooking fuel transitions: rural income and nighttime light intensity. Thus, interventions that aim to increase farmers’ income and initiatives to enhance electricity infrastructure will be effective in facilitating cooking fuel transitions in rural areas. Third, when implementing a food carbon tax, policymakers should carefully balance agricultural emissions abatement, economic stability, and food security. Fourth, our simulation results, indicating that the Russia-Ukraine conflict could amplify farmers’ expenditures on agricultural diesel induced by abolishing agricultural fuel subsidies, hint that policymakers might find it beneficial to consider delaying or implementing the plan in stages as an important policy entry point. Finally, our estimations underline the importance for policymakers to consider the impact of food price shocks on the macroeconomic dynamics, especially in the “5C” era.
Keywords: Agri-Food Systems; Sustainable Development; Climate Change; Food Prices; Macroeconomic Dynamics
