The purpose of this paper is to undertake a more comprehensive analysis of the impact of climate variables, technology and crop prices on crop yield and on crop acreage in the US using county-specific, historical data for 1977-2007. Specifically, we estimate the yield responses of corn, soybeans and wheat to output prices and to changes in climate and technology over time. We use instrumental variable regression methods to control for endogeneity of prices and county specific fixed effects to control for unobserved location specific effects on yield. We also examine the price responsiveness of total cropland and the own and cross-price elasticities of crop-specific acreage while controlling for climate and other socio-economic factors. Since our empirical framework includes lagged dependent variables and endogenous variables such as crop price, we use the dynamic panel GMM estimation method. We explore the implication of future climate change as projected by the Intergovernmental Panel on Climate Change (IPCC) (2001) for crop yields based on our estimated coefficients on climate variables. The main contributions of this study are to examine the impact of climate variables on crop yield and acreage while controlling for a number of other variables using panel data methods. We also provide updated estimates of various price elasticites and productivity growth trends that are critical to examining the extent to which rising crop yields can mitigate the food vs fuel competition for land and the extensive and intensive margin changes likely as crop prices increase.
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