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Interannual Climate Variation, Climate Prediction, and Agricultural Trade: the Costs of Surprise versus Variability

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  • Daniel G. Hallstrom

Abstract

Agriculture remains sensitive to variation in rainfall and temperature. Fortunately, our ability to predict the lower frequency variation in the earth's atmosphere is increasing rapidly. While information cannot affect the underlying source of variability, it allows unexpected shocks to be anticipated and acted upon. This paper develops and analyzes an intertemporal Ricardian trade model with Bayesian beliefs. Results in this paper show that improved climate prediction reduces expected prices, but increases price variability. In addition, trade is crucial to realizing the potential benefits of climate prediction. The value of climate prediction is highest with both storage and trade, and falls by over 300% when a country is in autarky.

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  • Daniel G. Hallstrom, 2004. "Interannual Climate Variation, Climate Prediction, and Agricultural Trade: the Costs of Surprise versus Variability," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 441-455, August.
    • Handle: RePEc:bla:reviec:v:12:y:2004:i:3:p:441-455
    DOI: 10.1111/j.1467-9396.2004.00460.x
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    Cited by:

    1. Reimer, Jeffrey J. & Li, Man, 2009. "Yield Variability and Agricultural Trade," Agricultural and Resource Economics Review, Cambridge University Press, vol. 38(2), pages 258-270, October.
    2. Jámbor, Attila & Balogh, Jeremiás Máté, 2020. "Az agrárkereskedelem környezeti hatásainak vizsgálata szisztematikus szakirodalmi áttekintés segítségével [Investigating environmental effects of agricultural trade through a systematic review of t," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 930-949.
    3. Vermeulen, S. J. & Aggarwal, Pramod & Ainslie, A. & Angelone, C. & Campbell, B. M. & Challinor, A. J. & Hansen, J. W. & Ingram, J. S. I. & Jarvis, A. & Kristjanson, P. & Lau, C. & Nelson, G. C. & Thor, 2010. "Agriculture, food security and climate change: outlook for knowledge, tools and action. Background paper prepared for The Hague Conference on Agriculture, Food Security and Climate Change, 31 October ," IWMI Research Reports H044643, International Water Management Institute.
    4. Cavazza, F. & Galioto, F. & Raggi, M. & Viaggi, D., 2018. "Changes in the information environment of water management: the role of ICT," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277247, International Association of Agricultural Economists.
    5. Jeremiás Máté Balogh & Attila Jámbor, 2020. "The Environmental Impacts of Agricultural Trade: A Systematic Literature Review," Sustainability, MDPI, vol. 12(3), pages 1-16, February.

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