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The impact of growing season temperature on grape prices in Australia

Author

Listed:
  • German Puga

    (Centre for Global Food and Resources, School of Economics and Public Policy, University of Adelaide, Australia, and Wine Economics Research Centre, School of Economics and Public Policy, University of Adelaide, Australia)

  • Kym Anderson

    (Wine Economics Research Centre, School of Economics and Public Policy, University of Adelaide, Australia, and Arndt-Corden Dept of Economics, Australian National University, Canberra ACT 2601, Australia)

  • Firmin Doko Tchatoka

    (School of Economics and Public Policy, University of Adelaide, Australia)

Abstract

Cross-sectional models are useful for quantifying the impact that climate or climate change may have on grape prices due to changes in grape quality. However, these models are susceptible to omitted variable bias. The aim of this study is to estimate the impact of growing season temperature (GST) on grape prices using cross-sectional data for Australia, while controlling for growing season precipitation, regional yield, variety, and other 103 characteristics that relate to the production system of the wine regions. We estimate this model using (area) weighted least squares and variables from a principal component analysis (PCA) to control for the characteristics that relate to the production system. This estimation strategy allows us to decrease omitted variable bias while avoiding multicollinearity and over-controlling issues. We show that failing to control for characteristics that relate to the production system overestimates the impact of GST and hence, climate change. This finding is confirmed by a LASSO model that also incorporates variables from the PCA, which we estimate as a robustness check using a cross-fit partialing-out estimator (double machine learning).

Suggested Citation

  • German Puga & Kym Anderson & Firmin Doko Tchatoka, 2021. "The impact of growing season temperature on grape prices in Australia," Wine Economics Research Centre Working Papers 2021-07, University of Adelaide, Wine Economics Research Centre.
    • Handle: RePEc:adl:winewp:2021-07
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    File URL: https://media.adelaide.edu.au/economics/papers/winedoc/winewp2021-07.pdf
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    More about this item

    Keywords

    omitted variable bias; climate impact; grape quality; grape price; climate change;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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