CoPS/IMPACT Working Paper Number G-141

Title: Using a highly disaggregated multi-regional single-country model to analyse the impacts of the 2002-03 drought on Australia

Authors: Mark Horridge, John Madden and Glyn Wittwer


TERM (The Enormous Regional Model) is a "bottom-up" CGE model of Australia which treats each region as a separate economy. TERM was created specifically to deal with highly disag-gregated regional data while providing a quick solution to simulations. This makes it a useful tool for examining the regional impacts of shocks that may be region-specific. We include some details of how we prepared the TERM database, using a national input-output table, together with regional data showing output (for agriculture) and employment (in other sectors) for each of 144 sectors and 57 regions [the Australian statistical divisions]. Using a 38-sector, 45-region aggregation of the model, we simulate the short-run effects of the Australian drought of 2002-03, which was the most widespread for 20 years. The effects on some statistical divisions are extreme, with income losses of up to 20 per cent. Despite the relatively small share of agriculture in Australian GDP, the drought reduces GDP by 1.6 per cent, and contributes to a decline in unemployment and to a worsening of the balance of trade.

JEL Classification: D58, R13, N57, O13.

Please cite the later published version in:
Journal of Policy Modeling, Vol 27/3 2005, pp. 285-308.

Working Paper Number G-141 can be downloaded in PDF format.

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