Analysis of Economic Ripple Effects in the Agricultural Field Using Input–Output Analysis: Drought Damage in Korea in 2018

Abstract

This study investigates the economic impact of the 2018 agricultural drought in Korea on the agricultural field through input–output analysis. Using industry linkage tables provided by the Bank of Korea, various economic impacts, including socio-economic and industry linkage effects, such as production, value added inducement effects, and employment inducement effects in the agricultural field, were analyzed. Our findings show the following: (1) It was found that an increase of 1 billion KRW (South Korean won) in output of agricultural, forestry, and fishery products induces an average of 0.6544 KRW in production inducement effects in other industries, 0.23756 KRW in value-added inducement effects, and 3.11363 in employment inducement effects per 1 billion KRW. (2) The supply shortage effect of agricultural, forestry, and fishery products was analyzed to cause a decrease in production of 2.3932 KRW across all industries, and the price inducing effect of a 10% increase in price was found to be 0.19400%, on average. The highest production inducement effects in the food and beverage industry (0.16514 KRW) and the highest value-added inducement effects (0.04391 KRW) came from agricultural, forestry, and fishery products. (3) In the industry linkage effect analysis, agricultural, forestry, and fishery products were found to have a forward linkage coefficient of 0.95652 and a backward linkage coefficient of 0.98911. It is implied by this result that the economic impact of agriculture on other industrial sectors is not significant. This study emphasizes the economic importance of agriculture by providing analytical results that can be utilized in agricultural policy formulation and economic decision-making. It can be used as an important basis for policy development for sustainable development and economic stability of the agricultural field. It can also contribute to a better understanding of how agriculture interacts with other industrial sectors and to the development of effective response strategies to natural disasters such as agricultural drought.