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On the evaluation of heterogeneous climate change impacts on US agriculture: does group membership matter?

Abstract

The Ricardian literature has only a handful of contributions addressing the presence of spatial heterogeneity in the marginal effects of climate change on agriculture. Although the majority of these studies offer models with group-specific slope parameters to account for spatial heterogeneity, large discrepancies on which grouping should be preferred still exist. This paper evaluates the extent to which expected future agricultural profits is sensitive to the four pre-determined groupings currently used in the literature. The results indicate that accounting for grouping uncertainty greatly increases the confidence interval around projected climate impacts. In addition, we do not find that one type of grouping is superior to any other. We suggest two potential solutions and emphasize the importance of explicitly controlling for grouping uncertainty in future studies.

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Data Availability

We will make the replication data available to the public.

Notes

  1. 1.

    The nonlinear effect of climate can also be modeled through Mth order polynomials (Schlenker and Roberts 2009) or an M-piecewise “binned” function (Barreca et al. 2016). Since our focal point is grouping uncertainty, it is beyond the scope of this paper to investigate whether adding nonlinear effects would lead to an efficiency gain.

  2. 2.

    In Timmins’ (2006) approach, the categories of land use are forest, pasture, temporary crops, and permanent crops.

  3. 3.

    For simplicity, we assume here that the effect of precipitation and all other exogenous determinants of net return or profits are appropriately controlled for.

  4. 4.

    Figure 1 is adapted from Mendelsohn et al. (1994). We choose temperature on the x-axis to illustrate the rationale of varying slope in the Ricardian framework. A similar conceptual framework could have been done for precipitation.

  5. 5.

    All figures are in 2012 constant US dollars.

  6. 6.

    Some states are grouped together though. One group is composed of AZ and NV. Another one includes CT, DE, MA, MD, ME, NH, NJ, RI, and VT. The authors do not explain the reason(s) for such groupings.

  7. 7.

    The rural counties are defined as the counties having a population density below 400 inhabitants per square mile (Schlenker et al. 2006; Dall’erba and Domínguez 2016). We drop 34 rural counties that have missing socio-economic or soil data for 1 or more years. In addition, there are 143 instances missing agricultural profit observation, which are replaced with the average of the remaining years’ values. The sample restrictions are imposed to provide a balanced panel of counties from 1997 to 2012 for the subsequent analysis.

  8. 8.

    Recent research shows that the threshold to calculate growing season degree-days is broadly representative of major crops such as corn, soybeans, and cotton (Ritchie and NeSmith 1991). Some crops and varieties have different growing seasons. For example, winter wheat is planted in September through November and harvested in late Spring and early Summer.

  9. 9.

    The soil data and the weather conditions are initially two raster datasets. We aggregate each of them to the county level using the ArcGIS toolbox.

  10. 10.

    Under this assumption, slope coefficients are treated as completely different across different individual units, and each βi is estimated by a separate regression. Traditional panel models frequently assume complete slope homogeneity. Extension to other covariates is straightforward.

  11. 11.

    The discount rate is the ratio of net farm income to aggregate farm value. It allows us to convert annual profits into land values.

  12. 12.

    The results in panel are available from the authors upon request.

  13. 13.

    Tables S5–S8 report the results of robustness checks based on a log-linear functional form and the presence of temperature-precipitation interactions. These results confirm our main findings.

  14. 14.

    Because the numerical algorithm in implementation of C-Lasso involves separate regressions at the initial step and half-panel jackknife method to correct bias, a panel with long time series is recommended. Because no county-level measures of the dependent variable, profit per acre, exist beyond agricultural census years, we obtain raw data at the state level to construct annual profits per acre from USDA Agricultural Resource Management Survey (ARMS). We then aggregate all the climate and socioeconomic measures of all counties in a state. Using the time spanning 1993–2002, we are able to compile a balanced panel of 48 states. Note that the paucity of state-level panel data results in a classification on a coarser geographic scale than a county-level panel.

  15. 15.

    A similar analysis can be done for any other climate variable.

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Code availability (software application or custom code)

We will make the replication code available to the public.

Funding

This study was funded by USDA Hatch grant.

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Contributions

All authors contributed to the study conception and design. The data collection and econometric analysis were performed by Chang Cai. All authors contributed to the writing of the manuscript. All authors read and approved the final manuscript. Sandy Dall’erba secured funding for this study.

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Correspondence to Chang Cai.

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The authors declare no competing interests.

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Cai, C., Dall’Erba, S. On the evaluation of heterogeneous climate change impacts on US agriculture: does group membership matter?. Climatic Change 167, 14 (2021). https://doi.org/10.1007/s10584-021-03154-5

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Keywords

  • Climate change
  • Agriculture
  • Spatial heterogeneity
  • Grouping uncertainty