The Effect of Weather Conditions on Fertilizer Applications: A Spatial Dynamic Panel Data Analysis

Abstract

AbstractGiven the extreme dependence of agriculture on weather conditions, this paper analyses the effect of climatic variations on this economic sector, by considering both a huge data set and a flexible spatiotemporal model specification. In particular, we study the response of N-fertilizer application to abnormal weather conditions, while accounting for other relevant control variables. The data set consists of gridded data spanning over 21 years (1993–2013), while the methodological strategy makes use of a spatial dynamic panel data (SDPD) model that accounts for both space and time fixed effects, besides dealing with both space and time dependences. Time-invariant short- and long-term effects, as well as time-varying marginal effects are also properly defined, revealing interesting results on the impact of both GDP and weather conditions on fertilizer utilizations. The analysis considers four macroregions—Europe, South America, Southeast Asia and Africa—to allow for comparisons among different socio-economic societies. In addition to finding both spatial (in the form of knowledge spillover effects) and temporal dependences as well as a good support for the existence of an environmental Kuznets curve for fertilizer application, the paper shows peculiar responses of N-fertilization to deviations from normal weather conditions of moisture for each selected region, calling for ad hoc policy interventions.