Climate Change and Agriculture Reconsidered

Despite the existence of a large and growing literature on the potential impact of climate change on agriculture, there still exists some disagreement about the magnitude and even the sign. Our own research suggests that the impact on U.S. agriculture is likely to be strongly negative, based on a series of studies in which we link farmland values to climate variables, and crop yields to both climate and yearly weather variables. Results are significant, robust, and consistent across data sets and methods. A recent but influential study by Deschenes and Greenstone (2007b) reports dramatically different results: based on regressions of agricultural profits and yields on weather variables, they conclude that the impact of climate change will be either insignificant or positive. In this paper we reconcile these conflicting results. Likely explanations for the divergence between our findings and theirs are: (1) missing and almost certainly incorrect weather and climate data in their study, amplified by the use of state-by-year fixed effects that absorb most year-to-year weather variation but leave data errors intact; (2) their unusual and in our judgment incorrect treatment of climate change predictions; (3) their use of the older Hadley II climate model for climate change predictions rather than the more recent and less optimistic Hadley III climate model used in the Fourth IPCC Report and in our studies; and (4) theoretical difficulties in their profit based approach due to the confounding effects of storage and possibly also capital and inventory adjustments and local price movements associated with weather fluctuations. A careful account of these factors shows that the balance of evidence weighs heavily on the side of severe adverse potential impacts on U.S. agriculture by the end of the century, and probably sooner, stemming from anticipated global warming.

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