Climate Econometrics: Can the Panel Approach Account for Long-Run Adaptation?

• Main Authors: Gammans, M. (Author), Mérel, P. (Author)
• Format: Article
• Language: English
• Published: John Wiley and Sons Inc 2021
• Subjects: adaptive management; climate adaptation; climate change; climate effect; crop yield; econometrics; empirical analysis; France; long run; panel data; United States
• Online Access: View Fulltext in Publisher

 The panel approach with fixed effects and nonlinear weather effects has become a popular method to uncover weather impacts on economic outcomes, but its ability to capture long-run climatic adaptation remains unclear. Building upon a framework proposed by McIntosh and Schlenker (2006), this paper identifies empirical conditions under which the nonlinear panel approach can approximate a long-run response to climate. When these conditions fail, the obtained relationship may still be interpretable as a weighted average of underlying short-run and long-run responses. We use this decomposition to revisit recently published climate impact estimates. For spatially large panels, the estimated temperature–outcome relationship mostly reflects the long-run climatic response; this is not so for precipitation. We find some evidence of long-run climatic adaptation for crop yield outcomes in the United States and France. © 2021 Agricultural and Applied Economics Association.