The economic impacts of climate change : evidence from agricultural profits and random fluctuations in weather
This paper measures the economic impact of climate change on US agricultural land by estimating the effect of the presumably random year-to-year variation in temperature and precipitation on agricultural profits. Using long-run climate change predictions from the Hadley 2 Model, the preferred estima...
| Main Authors: | , |
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| Format: | Working Paper |
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MIT Center for Energy and Environmental Policy Research
2009
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| Online Access: | http://hdl.handle.net/1721.1/45048 |
| _version_ | 1811084228635394048 |
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| author | Deschênes, Olivier Greenstone, Michael |
| author2 | Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. |
| author_facet | Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. Deschênes, Olivier Greenstone, Michael |
| author_sort | Deschênes, Olivier |
| collection | MIT |
| description | This paper measures the economic impact of climate change on US agricultural land by estimating the effect of the presumably random year-to-year variation in temperature and precipitation on agricultural profits. Using long-run climate change predictions from the Hadley 2 Model, the preferred estimates indicate that climate change will lead to a $1.1 billion (2002$) or 3.4% increase in annual profits. The 95% confidence interval ranges from -$1.8 billion to $4.0 billion and the impact is robust to a wide variety of specification checks, so large negative or positive effects are unlikely. There is considerable heterogeneity in the effect across the country with California's predicted impact equal to -$2.4 billion (or nearly 50% of state agricultural profits). Further, the analysis indicates that the predicted increases in temperature and precipitation will have virtually no effect on yields among the most important crops. These crop yield findings suggest that the small effect on profits is not due to short-run price increases. The paper also implements the hedonic approach that is predominant in the previous literature. We conclude that this approach may be unreliable, because it produces estimates of the effect of climate change that are very sensitive to seemingly minor decisions about the appropriate control variables, sample and weighting. Overall, the findings contradict the popular view that climate change will have substantial negative welfare consequences for the US agricultural sector. |
| first_indexed | 2024-09-23T12:47:19Z |
| format | Working Paper |
| id | mit-1721.1/45048 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T12:47:19Z |
| publishDate | 2009 |
| publisher | MIT Center for Energy and Environmental Policy Research |
| record_format | dspace |
| spelling | mit-1721.1/450482019-04-10T14:52:19Z The economic impacts of climate change : evidence from agricultural profits and random fluctuations in weather Deschênes, Olivier Greenstone, Michael Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research. Climatic changes Greenhouse gas mitigation This paper measures the economic impact of climate change on US agricultural land by estimating the effect of the presumably random year-to-year variation in temperature and precipitation on agricultural profits. Using long-run climate change predictions from the Hadley 2 Model, the preferred estimates indicate that climate change will lead to a $1.1 billion (2002$) or 3.4% increase in annual profits. The 95% confidence interval ranges from -$1.8 billion to $4.0 billion and the impact is robust to a wide variety of specification checks, so large negative or positive effects are unlikely. There is considerable heterogeneity in the effect across the country with California's predicted impact equal to -$2.4 billion (or nearly 50% of state agricultural profits). Further, the analysis indicates that the predicted increases in temperature and precipitation will have virtually no effect on yields among the most important crops. These crop yield findings suggest that the small effect on profits is not due to short-run price increases. The paper also implements the hedonic approach that is predominant in the previous literature. We conclude that this approach may be unreliable, because it produces estimates of the effect of climate change that are very sensitive to seemingly minor decisions about the appropriate control variables, sample and weighting. Overall, the findings contradict the popular view that climate change will have substantial negative welfare consequences for the US agricultural sector. 2009-04-03T17:07:06Z 2009-04-03T17:07:06Z 2006 Working Paper 2006-001 http://hdl.handle.net/1721.1/45048 68723117 MIT-CEEPR (Series) ; 06-001WP. 37, [18] p application/pdf MIT Center for Energy and Environmental Policy Research |
| spellingShingle | Climatic changes Greenhouse gas mitigation Deschênes, Olivier Greenstone, Michael The economic impacts of climate change : evidence from agricultural profits and random fluctuations in weather |
| title | The economic impacts of climate change : evidence from agricultural profits and random fluctuations in weather |
| title_full | The economic impacts of climate change : evidence from agricultural profits and random fluctuations in weather |
| title_fullStr | The economic impacts of climate change : evidence from agricultural profits and random fluctuations in weather |
| title_full_unstemmed | The economic impacts of climate change : evidence from agricultural profits and random fluctuations in weather |
| title_short | The economic impacts of climate change : evidence from agricultural profits and random fluctuations in weather |
| title_sort | economic impacts of climate change evidence from agricultural profits and random fluctuations in weather |
| topic | Climatic changes Greenhouse gas mitigation |
| url | http://hdl.handle.net/1721.1/45048 |
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