The UNU WIDER Working Paper 2024/71 examines the effects of climate shocks on firms in Zambia, revealing that extreme weather significantly diminishes sales, input purchases, and tax revenues. It highlights the adverse implications for employment and productivity within key sectors, urging a combined evaluation of climate impacts on economic performance and government financial stability in low-income countries.
The UNU WIDER Working Paper 2024/71 presents critical insights into the intersection between climate phenomena and economic resilience, with a specific focus on Zambia’s formal sector. Researchers Kwabena Adu-Ababio, Evaristo Mwale, and Rodrigo Oliveira analyze how extreme weather events, including excess rainfall and elevated temperatures, adversely affect firm performance and tax revenue in a low-income context. Using detailed firm-level data, the authors reveal that these climate shocks lead to a notable decline in firms’ sales and input purchases, primarily impacting sectors such as manufacturing, retail, accommodation, and construction. Furthermore, the detrimental effects manifest in reduced employment and wages, underscoring a significant contraction in productivity. Their findings necessitate a more integrated approach to understanding the ramifications of climate shocks on both economic output and state revenue, particularly in nations where taxation on goods and services constitutes a major part of governmental budgets.
The intersectionality of climate change and economic development in low-income countries remains a relatively underexplored area within the academic literature. Zambia serves as a pertinent case study, exemplifying the vulnerabilities faced by nations with limited financial resources while grappling with climate variability. The formal sector in Zambia, being essential for economic growth, requires a thorough understanding of how climatic disturbances impact operational functionalities and tax income, which directly affect governmental capacity to provide essential services and implement developmental programs.
In conclusion, the study elucidates the significant adverse effects of climate shocks on the economic performance within Zambia’s formal sector. The pronounced decline in sales, purchasing activities, and consequent reduction in tax revenue highlights the critical need for policymakers to adopt integrated strategies that consider both climatic impacts and economic resilience. This research advocates for enhanced awareness and proactive measures to mitigate the challenges posed by climate change, ensuring sustainable growth and effective taxation systems in low-income countries.
Original Source: reliefweb.int
