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The Impacts of Climate Change on Agricultural Farm Profits in the U.S


  • Lee, Jaehyuk
  • Nadolnyak, Denis A.


Global warming has been an issue lately in many aspects because it has been in increasing trend since 1980s. This paper estimates the climate change effects on U.S. agriculture using the pooled cross-section farm profit model. The data are mainly based on the annual Agricultural Resource Management Survey (ARMS) from USDA for the time period between 2000 and 2009 in the 48 contiguous States. For climate measure, growing season drought indices (the Palmer Drought Severity Index (PDSI) and Crop Moisture Index (CMI)) are applied to the analysis and both indices have a negative relationship with temperature. The estimates indicate that one unit increase in PDSI (CMI) leads to 5.5% (13.9%), 4% (9%), and 5% (14%) increase in farm profits for all farms, crop farms, and livestock farms. This paper provides several contributions to the literature. First, the data set is very rare and unique national survey that provides an individual farm level observation. Therefore, it gives more detailed farm structure and financial information for the analysis compared to other studies. Second, drought indices (PDSI and CMI) are used for estimating the impact of weather on farm profits while temperature, precipitation, and growing degree-days are typical weather variables in literatures.

Suggested Citation

  • Lee, Jaehyuk & Nadolnyak, Denis A., 2012. "The Impacts of Climate Change on Agricultural Farm Profits in the U.S," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124801, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea12:124801

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    References listed on IDEAS

    1. Kelly, David L. & Kolstad, Charles D. & Mitchell, Glenn T., 2005. "Adjustment costs from environmental change," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 468-495, November.
    2. Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-771, September.
    3. Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2005. "Will U.S. Agriculture Really Benefit from Global Warming? Accounting for Irrigation in the Hedonic Approach," American Economic Review, American Economic Association, vol. 95(1), pages 395-406, March.
    4. Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2006. "The Impact of Global Warming on U.S. Agriculture: An Econometric Analysis of Optimal Growing Conditions," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 113-125, February.
    5. Olivier Deschenes & Charles Kolstad, 2011. "Economic impacts of climate change on California agriculture," Climatic Change, Springer, vol. 109(1), pages 365-386, December.
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    Cited by:

    1. Ge, Yan & Cai, Ximing & Zhu, Tingju & Ringler, Claudia, 2016. "Drought frequency change: An assessment in northern India plains," Agricultural Water Management, Elsevier, vol. 176(C), pages 111-121.

    More about this item


    Climate change; Farm profits; Drought Index; the Palmer Drought Severity Index (PDSI); Crop Moisture Index (CMI); Environmental Economics and Policy; Q54; D24;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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