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

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Author Info
Olivier Deschênes
Michael Greenstone

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Abstract

This paper measures the economic impact of climate change on US agricultural land by estimating the effect of random year-to-year variation in temperature and precipitation on agricultural profits. The preferred estimates indicate that climate change will increase annual profits by $1.3 billion in 2002 dollars (2002$) or 4 percent. This estimate is robust to numerous specification checks and relatively precise, so large negative or positive effects are unlikely. We also find the hedonic approach—which is the standard in the previous literature—to be unreliable because it produces estimates that are extremely sensitive to seemingly minor choices about control variables, sample, and weighting. (JEL L25, Q12, Q51, Q54)

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File URL: http://hdl.handle.net/10.1257/aer.97.1.354
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 1 (March)
Pages: 354-385
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Handle: RePEc:aea:aecrev:v:97:y:2007:i:1:p:354-385

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  1. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September. [Downloadable!] (restricted)
  2. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
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  3. Sandra E. Black, 1997. "Do better schools matter? Parental valuation of elementary education," Research Paper 9729, Federal Reserve Bank of New York. [Downloadable!]
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  4. Joseph G. Altonji & Todd E. Elder & Christopher R. Taber, 2000. "Selection on Observed and Unobserved Variables: Assessing the Effectiveness of Catholic Schools," NBER Working Papers 7831, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2004. "Identification and Estimation of Hedonic Models," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S60-S109, February. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Cai, Yongxia & McCarl, Bruce A., 2009. "Climate Change and Texas Water Planning: an Economic Analysis of Inter-basin Water Transfers," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49933, Agricultural and Applied Economics Association. [Downloadable!]
  2. Reid, Hannah & Sahlen, Linda & Stage, Jesper & MacGregor, James, 2007. "The economic impact of climate change in Namibia. How climate change will affect the contribution of Namibia’s natural resources to its economy," Discussion Papers 37922, International Institute for Environment and Development, Environmental Economics Programme. [Downloadable!]
  3. Van Butsic & Ellen Hanak & Robert G. Valletta, 2008. "Climate change and asset prices: hedonic estimates for North American ski resorts," Working Paper Series 2008-12, Federal Reserve Bank of San Francisco. [Downloadable!]
  4. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2008. "Climate Change and Economic Growth: Evidence from the Last Half Century," NBER Working Papers 14132, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Seo, S. Niggol & Mendelsohn, Robert, 2008. "A structural ricardian analysis of climate change impacts and adaptations in African agriculture," Policy Research Working Paper Series 4603, The World Bank. [Downloadable!]
  6. Paul Dolan & Robert Metcalfe, 2008. "Comparing Willingness-to-Pay and Subjective Well-Being in the Context of Non-Market Goods," CEP Discussion Papers dp0890, Centre for Economic Performance, LSE. [Downloadable!]
  7. Markus Baldauf & J.M.C. Santos Silva, 2009. "On the use of robust regression in econometrics," Economics Discussion Papers 664, University of Essex, Department of Economics. [Downloadable!]
  8. Tol, Richard S. J. & Narita, Daiju & Anthoff, David, 2008. "Damage Costs of Climate Change through Intensification of Tropical Cyclone Activities: An Application of FUND," Papers WP259, Economic and Social Research Institute (ESRI). [Downloadable!]
  9. Wolfram Schlenker & Michael 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. [Downloadable!] (restricted)
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  10. Michael Greenstone & Ted Gayer, 2007. "Quasi-Experimental and Experimental Approaches to Environmental Economics," Working Papers 0713, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research. [Downloadable!]
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  11. Seo, Niggol & Mendelsohn, Robert & Dinar, Ariel & Kurukulasuriya, Pradeep & Hassan, Rashid, 2008. "Long-term adaptation : selecting farm types across agro-ecological zones in Africa," Policy Research Working Paper Series 4602, The World Bank. [Downloadable!]
  12. Van Butsic & Ellen Hanak & Rob Valletta, 2008. "Regional variation in the potential economic effects of climate change," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue Aug 22. [Downloadable!]
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