Climate impact on agroeconomy in semiarid region of Armenia

With 21 % of gross domestic product (GDP) in agricultural sector and having consistently experienced natural disasters (e.g., drought, flood), Armenia is very vulnerable to climate and its change. Given the fact that 63 % of the entire land is planted with grains, this study primarily focuses on the market for wheat flour and bread. Economic welfare loss due to drought episodes is calculated using the economic data integrated with climate measures. Economic data are utilized for the period 1995–2011 (obtained from Statistical Office of Armenia) and specifically include the quantity produced and consumed of wheat flour and bread combined with mean prices, population income, GDP in the agricultural sector, GDP in the planting sector, and governmental expenditure on subsidies. Climate data include temperature and precipitation during the period 1966–2011 (obtained from National Hydrometeorological Service of Armenia). The analysis includes three main components. The first utilizes a market framework that analyzes the impact of climate on equilibrium prices and quantities as well as trade and tax effects. The second employs a logarithmic utility function to estimate the effective insurance policy for the agricultural sector using risk management strategies. Lastly, a macroeconomic model has been developed to assess the efficient sum of governmental expenditure on subsidies and irrigation during the drought episodes and during the mean climatic conditions. All three parts of the study are developed for the first time.