By Wei Zhang, Assistant Professor, Applied and Agricultural Economics, Virginia Tech
Professor Zhang is the GAP Initiative Faculty Research Fellow. Funding for her research was provided by CALS Global in the College of Agriculture and Life Sciences at Virginia Tech
Studies of climate change and agriculture tend to focus on a limited number of environmental or agricultural factors, reducing their usefulness in evaluating complex, system-level threats.
As a performance indicator of a country’s agriculture system, total factor productivity growth captures the overall impact of climate events.
Extreme climate events are estimated to have, on average, a negative and statistically significant impact on the TFP growth rate.
The estimated impact of droughts is more than three times the impact of an average extreme climate event.
Climate shocks can have a sustained impact on the growth trajectory of agricultural productivity well beyond the initial event.
Climate change affects many dimensions of agricultural systems and could threaten global food security and social stability (Wheeler and Von Braun, 2013). However, studies have disproportionately focused on the effects of changes in average seasonal temperature and precipitation (see, e.g., Schlenker and Roberts, 2009; Lobell et al., 2011). However, it is increasingly evident that climate change has implications besides rising average temperature or precipitation.
The frequency and intensity of extreme weather events, such as severe droughts, intense storms, or scorching heat waves, have increased over the last few decades. Our research examines the relationship between extreme climate events and agricultural productivity growth across countries. It is hard to overemphasize the importance of enhancing agricultural productivity for poverty reduction and economic transformation (Johnston and Mellor, 1961; Christiaensen et al., 2011; Jayne et al., 2021). Climate change studies that focus on one type of agricultural output, such as crops, are minimally helpful in evaluating the overall performance of agricultural systems under a changing climate. In response to climate change, adjustments in agricultural inputs, such as land, must also be captured (Aragón et al., 2021). Consequently, studies of the impact of climatic factors on aggregate agricultural productivity growth are particularly important for projections of future changes in climate on the agricultural sector and the whole economy (Liang et al., 2017).
We use total factor productivity (TFP) to measure agricultural productivity. TFP is the ratio of aggregate output to aggregate input, including land, labor, capital, and other materials. The data on extreme climate events are from the International Disasters Database (EM-DAT). We include the following climate events in our study: storm, extreme temperature, flood, drought, and wildfire. Though there is no consensus on the classification of extreme climate events, this list includes most of the commonly considered weather and climate events.
When extreme climate events occur, many aspects of agricultural systems are influenced. The immediate outcome is the diminution of agricultural output (Lesk et al., 2016). In addition, regional resource reallocation could follow, such as the diversion of irrigation water or changes in transportation channels. The physical capital of agricultural production, such as machinery and livestock inventory, and the infrastructure of supply chains, such as roads or storage units, could also be negatively affected. The economic consequences often go beyond the impact area of an extreme climate event. Thus, extreme climate events could affect the entire agricultural sector or even a country’s economy. Agricultural TFP growth as a performance indicator of a country’s agriculture captures the overall impact of climate events.
Climate shocks can have a sustained impact on the growth trajectory of agricultural productivity. Dynamic effects are frequently long-lasting, representing the impacts of climate change on the adjustment path of agricultural systems. When climate shocks result in productive asset destruction, households, communities, and countries may have to save and reinvest to return to the capacity to produce at the level they had before the shock.
In general, one would expect the TFP growth rate to be lower than the trend on impact due to loss of outputs but could be either higher or lower than the trend thereafter. For example, if a drought leads to investment in irrigation systems or adopting drought-tolerant seed varieties, TFP growth could be faster than along the previous trajectory (Caballero et al., 1994). However, institutional constraints, such as lack of credit or access to markets, could affect the long-term impact of extreme climate events. Studies have shown that long-run impacts of extreme climate events are particularly damaging to the economic development of disaster-prone low-income countries (Carleton and Hsiang, 2016; Hallegatte and Rozenberg, 2017). Households and countries struggling to meet basic consumption requirements may have a tough time for reconstruction and asset accumulation, thus staying at a lower growth path or even trapped in a low-level equilibrium (Hallegatte et al., 2007).
We estimate that extreme climate events on average have a negative and statistically significant impact on the TFP growth rate. The estimate is not sensitive to controlling for changes in temperature and precipitation. To put the estimate in perspective, in a year when the total number of extreme climate events per 100 square km is at the sample mean of 1961–2016 (0.0022), TFP growth rate is estimated to be lowered by 0.46 percentage points. In 2016, Haiti experienced floods, storms, and drought, which put their total number of extreme climate events per 100 square km to be 0.029, at the 99th percentile of our measure of extreme climate events. Based on our estimate, their TFP growth rate would be lowered by six percentage points.
The estimated impacts on TFP growth rate are all negative across different extreme climate event types and are statistically significant for storms and droughts. The estimated impact of droughts is more than three times the impact of an average extreme climate event. At the sample mean of our measure of drought (0.0015), the TFP growth rate would be lowered by 1.11 percentage points. Future analysis could examine the channels through which droughts could affect agricultural productivity growth more than storms or floods. One hypothesis is that droughts affect wider geographic areas than storms or floods. Though not precise, the estimated impact of wildfires on TFP growth is the largest among all types, about six times the impact of an average extreme climate event. One hypothesis is that wildfires damage the capital of agricultural production, such as perennial crops, more than other extreme climate events.
Our study provides an overall assessment of extreme climate events on agricultural productivity growth. Macro-econometric studies like ours do not capture their impact at the sub-national level (Damania et al., 2020). Future finer-scale studies could be insightful on the channels of adaptation of agricultural systems—both institutional and physical—to climate extremes.
Correspondence for Wei Zhang may be sent to: [email protected].
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