The impact of growing season temperature on grape prices in Australia

German Puga, Kym Anderson and Firmin Doko Tchatoka

No 2021-07, Wine Economics Research Centre Working Papers from University of Adelaide, Wine Economics Research Centre

Abstract: Cross-sectional models are useful for quantifying the impact that climate or climate change may have on grape prices due to changes in grape quality. However, these models are susceptible to omitted variable bias. The aim of this study is to estimate the impact of growing season temperature (GST) on grape prices using cross-sectional data for Australia, while controlling for growing season precipitation, regional yield, variety, and other 103 characteristics that relate to the production system of the wine regions. We estimate this model using (area) weighted least squares and variables from a principal component analysis (PCA) to control for the characteristics that relate to the production system. This estimation strategy allows us to decrease omitted variable bias while avoiding multicollinearity and over-controlling issues. We show that failing to control for characteristics that relate to the production system overestimates the impact of GST and hence, climate change. This finding is confirmed by a LASSO model that also incorporates variables from the PCA, which we estimate as a robustness check using a cross-fit partialing-out estimator (double machine learning).

Keywords: omitted variable bias; climate impact; grape quality; grape price; climate change (search for similar items in EconPapers)
JEL-codes: Q11 Q15 Q54 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2021-11
New Economics Papers: this item is included in nep-agr, nep-big and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:adl:winewp:2021-07

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