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The Economic Impacts of Climate Change: Evidence from Agricultural Profits and Random Fluctuations of Weather

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dc.contributor.author Deschenes, Olivier.
dc.contributor.author Greenstone, Michael.
dc.date.accessioned 2006-02-08T19:56:19Z
dc.date.available 2006-02-08T19:56:19Z
dc.date.issued 2006-01
dc.identifier.uri http://mit.edu/globalchange/www/abstracts.html#a131
dc.identifier.uri http://hdl.handle.net/1721.1/31205
dc.description Abstract in HTML and technical report in PDF available on the Massachusetts Institute of Technology Joint Program on the Science and Policy of Global Change website (http://mit.edu/globalchange/www/). en
dc.description.abstract This paper measures the economic impact of climate change on agricultural land in the United States 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. en
dc.description.sponsorship Greenstone acknowledges generous funding from the American Bar Foundation. en
dc.format.extent 2595478 bytes
dc.format.mimetype application/pdf
dc.language.iso en_US en
dc.publisher MIT Joint Program on the Science and Policy of Global Change en
dc.relation.ispartofseries Report no. 131 en
dc.title The Economic Impacts of Climate Change: Evidence from Agricultural Profits and Random Fluctuations of Weather en
dc.type Technical Report en
dc.identifier.citation Report no. 131 en


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