Assessing the value of climate information and forecasts for the agricultural sector in the Southeastern United States: multi-output stochastic frontier approach
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A multi-output/input stochastic distance frontier model is used to analyze the effect of interannual climatic variability on agricultural production and to assess the impact of climate forecasts on the economic performance of this sector in the Southeastern United States. The results show that the omission of climatic conditions when estimating regional agricultural production models could lead to biased technical efficiency (TE) estimates. This climate bias may significantly affect the effectiveness of rural development policies based on regional economic performance comparisons. We also found that seasonal rainfall and temperature forecasts have a positive effect on economic performance of agriculture. However, the effectiveness of climate forecasts on improving TE is sensitive to the type of climate index used. Policy implications stemming from the results are also presented.
KeywordsUS Agriculture Climate bias Value of information Production frontier
We would like to thank two anonymous referees and seminar participants at 2011 Southern Agricultural Economics Association annual meeting, and the Southeast Climate Consortium Program Review for comments and suggestions. Research support grants from the Office of Science and Technology, and the Office of Climate, Water and Weather Services at The National Oceanic and Atmospheric Administration—National Weather Service, and from USDA/NIFA grant No. 2011-0828 are gratefully acknowledged.
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