Effects of food export policy shocks on the Food-Energy-Water nexus in Ethiopia

Ethiopia is an east African country with over 70% of the labor force dependent on agriculture for their livelihood. Agriculture contributes to about 40% of the GDP of the country. Agricultural products constitute about 60% of all exports, with coffee alone occupying about 25%. The country's agriculture and food supply chain is not immune to stimuli from the rest of the world. The 2008 global food price hike caused deep distress to the country's food sector. The adverse effect of such a global change motivated the Ethiopian government to ban export of cereals indefinitely to ensure more affordable domestic prices; however, this export ban came at a cost of social welfare. In this study, we aim to quantify the effect of government policy, particularly for food exports, on Ethiopia's food security and economic well-being through a Food-Energy-Water system model. Questions we pose include: What would happen if the export ban on the cereals is lifted? How will lifting the export ban impact domestic market prices? Which parts of the country benefit the most from the potential higher revenue from exports and which parts of the country suffer from the increased domestic prices? To answer these questions, we present an integrated partial-equilibrium model: a zonal-level multiplayer-microeconomic-equilibrium model (MME) for the Ethiopian food supply chain and its interaction with the external world. In the model, multiple players in each zone decide on variables they control simultaneously to maximize their objective (typically profit or utility), while the system reaches an equilibrium. A shift in the equilibrium under policy shocks can be obtained to evaluate the system responses in terms of profits, market prices, food consumption, and social welfare at a zonal level.