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The Economic Impacts of Climate Change on Agriculture: Accounting for Time-invariant Unobservables in the Hedonic Approach

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  • Ortiz-Bobea, Ariel

Abstract

I propose a strategy of measuring the long-run economic impact of climate change on farmland values that tackles the elusive problem of time-invariant spatially-dependent unobservables in the hedonic approach. The strategy exploits that a county’s agricultural productivity is primarily influenced by its own climate, and the fact that climate assignment appears random conditional on average county-neighborhood characteristics. Results suggest that large impacts of climate change on US agriculture seem unlikely. Findings are robust to multiple checks and cannot be attributed to measurement error. Ignoring such confounders considerably overstates long-run climate change impacts on the sector.

Suggested Citation

  • Ortiz-Bobea, Ariel, 2016. "The Economic Impacts of Climate Change on Agriculture: Accounting for Time-invariant Unobservables in the Hedonic Approach," Working Papers 250035, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:250035
    DOI: 10.22004/ag.econ.250035
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    References listed on IDEAS

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    1. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-533, May.
    2. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    3. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
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    Cited by:

    1. Ariel Ortiz-Bobea, 2021. "Climate, Agriculture and Food," Papers 2105.12044, arXiv.org.
    2. Guilherme DePaula, 2018. "The Distributional Impact of Climate Change in Brazilian Agriculture: A Ricardian Quantile Analysis with Census Data," Center for Agricultural and Rural Development (CARD) Publications 18-wp583, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. Arellano Gonzalez, Jesus, 2018. "Estimating climate change damages in data scarce and non-competitive settings: a novel version of the Ricardian approach with an application to Mexico," 2018 Annual Meeting, August 5-7, Washington, D.C. 274010, Agricultural and Applied Economics Association.
    4. DePaula, Guilherme, 2020. "The distributional effect of climate change on agriculture: Evidence from a Ricardian quantile analysis of Brazilian census data," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    5. Frederick Quaye & Denis Nadolnyak & Valentina Hartarska, 2018. "Climate Change Impacts on Farmland Values in the Southeast United States," Sustainability, MDPI, vol. 10(10), pages 1-16, September.

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    Keywords

    Environmental Economics and Policy; Land Economics/Use;

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