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The Problem with Poor Proxies: Does Innovation Mitigate Agricultural Damage from Climate Change?

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  • Fitzgerald, Jack

Abstract

Moscona & Sastry (2023, Quarterly Journal of Economics) - henceforth MS23 - find that cropland values are significantly less damaged by extreme heat exposure (EHE) when crops are more exposed to technological innovation. However, MS23's 'innovation exposure' variable does not measure innovation, instead proxying innovation using a measure of crops' national heat exposure. A re-examination of MS23's replication data - which permits a close but inexact reproduction of MS23's published findings - shows that this proxy moderates EHE impacts for reasons unrelated to innovation. The proxy is practically identical to local EHE, so MS23's models examining interaction effects between their proxy and local EHE effectively interact local EHE with itself. I document extensive evidence that MS23's findings on 'innovation exposure' are simply artefacts of nonlinear impacts in local EHE, and uncover robustness issues for other key findings. I then construct direct measures of innovation exposure from MS23's crop variety and patenting data. Replacing MS23's proxy with these direct innovation measures decreases MS23's moderating effect estimates by at least 99.8% in standardized units; none of these new estimates are statistically significantly different from zero. Similar results arise from an instrumental variables strategy that instruments my direct innovation measures with MS23's heat proxy. These results cast doubt on the general capacity for market innovations to mitigate agricultural damage from climate change.

Suggested Citation

  • Fitzgerald, Jack, 2024. "The Problem with Poor Proxies: Does Innovation Mitigate Agricultural Damage from Climate Change?," I4R Discussion Paper Series 158, The Institute for Replication (I4R).
    • Handle: RePEc:zbw:i4rdps:158
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    References listed on IDEAS

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    1. Richard Hornbeck, 2012. "Nature versus Nurture: The Environment's Persistent Influence through the Modernization of American Agriculture," American Economic Review, American Economic Association, vol. 102(3), pages 245-249, May.
    2. Wangyang Lai & Shanjun Li & Yanyan Liu & Panle Jia Barwick, 2022. "Adaptation mitigates the negative effect of temperature shocks on household consumption," Nature Human Behaviour, Nature, vol. 6(6), pages 837-846, June.
    3. Doucouliagos, Hristos (Chris), 2011. "How large is large? Preliminary and relative guidelines for interpreting partial correlations in economics," Working Papers eco_2011_5, Deakin University, Department of Economics.
    4. Wolfram Schlenker & Michael J. Roberts, 2008. "Estimating the Impact of Climate Change on Crop Yields: The Importance of Nonlinear Temperature Effects," NBER Working Papers 13799, National Bureau of Economic Research, Inc.
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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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