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Climate econometrics: Can the panel approach account for long-run adaptation?

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  • Mérel, Pierre
  • Gammans, Matthew

Abstract

The panel approach with fixed effects and nonlinear weather effects has become a popular method to uncover weather impacts on economic outcomes, but its ability to capture long-run climatic adaptation remains unclear. Building upon a framework proposed by McIntosh and Schlenker (2006), this paper identifies empirical conditions under which the nonlinear panel approach can approximate a long-run response to climate. When these conditions fail, the obtained relationship may still be interpretable as a weighted average of underlying short-run and long-run responses. We use this decomposition to revisit recently published climate impact estimates. For spatially large panels, the estimated temperature-outcome relationship mostly reflects the long-run climatic response; this is not so for precipitation. We find some evidence of long-run climatic adaptation for crop yield outcomes in the United States and France.
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  • Mérel, Pierre & Gammans, Matthew, 2018. "Climate econometrics: Can the panel approach account for long-run adaptation?," 2018 Annual Meeting, August 5-7, Washington, D.C. 274399, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea18:274399
    DOI: 10.22004/ag.econ.274399
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    Research Methods/Econometrics/Stats; Environmental and Nonmarket Valuation; Production Economics;
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