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Agricultural productivity in Latin America and the Caribbean in the presence of unobserved heterogeneity and climatic effects

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Abstract

Total factor productivity (TFP) analysis has been the focus of a large number of methodological and empirical studies over the past several decades. One remarkable gap in this literature is the omission of climatic variables as regressors in the models used to derive TFP measures. The purpose of this paper is to narrow this gap by developing climate-adjusted (CA) TFP measures. We combine information from the Climatic Research Unit with Food and Agriculture Organization data for 28 Latin American and Caribbean countries over a 52-year period (1961–2012) to estimate random parameter stochastic production frontier (SPF) models. The goal is to investigate the impact of climatic variability on TFP. The estimated coefficients from the SPF models are used to construct a climatic effects index across countries and over time. The average annual variation in climatic conditions is stronger at the end of the 2000s compared to earlier periods. Climatic variability has a negative effect on production in 20 of the 28 LAC countries analyzed, and this is more severe over Central America and the Caribbean. The average reduction in output across the region attributable to climatic variables is between 0.02 and 22.7% over the last decade compared to the period 1961–1999. The estimated average annual growth rate of CATFP (0.69%) is consistently lower than TFP (1.08%), confirming the adverse impact of climatic variability on agricultural output and productivity in LAC. The results show considerable variability across countries, and this points to the importance of accounting for climatic effects in analyzing TFP.

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Notes

  1. We exclude mean values because they do not capture variability.

  2. The 28 countries in LAC include (1) Caribbean: The Bahamas, Cuba, Dominican Republic, Haiti, Jamaica, Puerto Rico, and Trinidad and Tobago; (2) Mexico and Central America: Mexico, Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama; and (3) South America: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, French Guiana, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela.

  3. See https://www.ncdc.noaa.gov/monitoring-references/dyk/anomalies-vs-temperature for more details.

  4. For more details about the construction of the climatic variables, see Harris et al. (2013).

  5. We perform multicollinearity tests for all conventional inputs and climatic variables using the “rmcoll” syntax in Stata 14 (Cameron and Travedi 2005). The evidence does not support the presence of multicollinearity.

  6. We did not find evidence to support the inclusion of quadratic terms for climatic variability.

  7. Over the 1961–2012 period, fertilizer use grew at the fastest annual rate (5.8%) relative to all other inputs, while land increased at 1.3% per year. Figure C in the online Supplementary material (Section E) shows the trends for all inputs used in our models.

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Acknowledgments

The authors express their appreciation for the support received from the Inter-American Development Bank (IADB) that partially funded this work. We are grateful for comments provided by participants at the XIII European Workshop on Efficiency and Productivity Analysis (Helsinki, Finland, 2013), especially from Luis Orea. We also gratefully acknowledge comments received from Cesar Falconi, Pedro Martel, Eric Njuki, Chris O’Donnell, participants in the IADB Agricultural Productivity in LAC Workshop (November 26, 2014), anonymous reviewers and the editors of this Journal. The second author expresses his appreciation for support from the USDA-NIFA award 2016-67024-24760. Of course, we are responsible for any shortcomings.

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Authors and Affiliations

  1. Florida A&M University, Agribusiness Program, College of Agriculture and Food Sciences, Tallahassee, FL, 32307, USA

    Michee Arnold Lachaud

  2. Department of Agricultural and Resource Economics, University of Connecticut, Storrs, CT, USA

    Boris E. Bravo-Ureta

  3. Agricultural Economics, University of Talca, Talca, Chile

    Boris E. Bravo-Ureta

  4. Bangkok, Thailand

    Carlos E. Ludena

Authors
  1. Michee Arnold Lachaud
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  2. Boris E. Bravo-Ureta
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  3. Carlos E. Ludena
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Correspondence to Michee Arnold Lachaud.

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Lachaud, M.A., Bravo-Ureta, B.E. & Ludena, C.E. Agricultural productivity in Latin America and the Caribbean in the presence of unobserved heterogeneity and climatic effects. Climatic Change 143, 445–460 (2017). https://doi.org/10.1007/s10584-017-2013-1

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