Abstract
Random fluctuations in temperature and precipitation have substantial impacts on agricultural output. However, the contribution of these changing configurations in weather to total factor productivity (TFP) growth has not been addressed explicitly in econometric analyses. Thus, the key objective of this study is to quantify and to investigate the role of changing weather patterns in explaining yearly fluctuations in TFP. For this purpose, we define TFP to be a measure of total output divided by a measure of total input. We estimate a stochastic production frontier model using U.S. state-level agricultural data incorporating growing season temperature and precipitation, and intra-annual standard deviations of temperature and precipitation for the period 1960–2004. We use the estimated parameters of the model to compute a TFP index that has good axiomatic properties. We then decompose TFP growth in each state into weather effects, technological progress, technical efficiency, and scale-mix efficiency changes. This approach improves our understanding of the role of different components of TFP in agricultural productivity growth. We find that annual TFP growth averaged 1.56% between 1960 and 2004. Moreover, we observe substantial heterogeneity in weather effects across states and over time.
Highlights
According to the United States National Climate Assessment: “Climate change poses a major challenge to U.S agriculture because of the critical dependence of the agricultural system on climate and because of the complex role agriculture plays in rural and national social and economic systems” [1]
We find that the total factor productivity (TFP) growth rate averaged 1.56% per annum across the United States
This article builds upon previous studies that have analyzed total factor productivity (TFP) trends in U.S agriculture [27,29,33]
Summary
According to the United States National Climate Assessment: “Climate change poses a major challenge to U.S agriculture because of the critical dependence of the agricultural system on climate and because of the complex role agriculture plays in rural and national social and economic systems” [1]. This challenge is of major concern given the critical role that this country plays in global food production and world food markets. Understanding how to manage the agricultural sector in the face of climate change will enable the development of effective strategies aimed at coping with this challenge.
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