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Decomposing Weather Impacts on Crop Profits: the Role of Agrochemical Input Adjustments

Francois Bareille () and Raja Chakir ()

No 2021.09, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: The costs of climate change borne by agriculture are critically dependent on farmers' adaptation. In this paper, we investigate how farmers adjust their input mix in response to weather fluctuations during the growing season using individual panel data from Meuse (France) between 2006 and 2012. Specifically, we consider weather and price information to estimate structural models of profit-maximizing farmers with crop-specific yields and input-crop-specific demand functions, conditionally on farm and annual fixed effects. The results show that weather fluctu-ations affect crop yields but that farmers adapt their fertilizer and pesticide applications. We use our estimates to simulate the impacts of a climate change scenario: we show that farmers in Meuse would increase fertilizer applications by 2.60% but reduce pesticide applications by 6.92% under an RCP 4.5 scenario in 2050. These adjustments limit the negative direct impacts of climate change on plant growth, though heterogeneously among crops. In total, the added value of the agricultural sector is likely to reduce by 3.02%. Society could benefit from adaptation as the reduction in damage due to agrochemicals' negative externalities represents twice the market costs borne by the agricultural sector.

Keywords: Climate Change; Variable input; Growing season adjustments; Short-term adaptation; Structural econometrics (search for similar items in EconPapers)
JEL-codes: Q12 Q53 Q54 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2021-06
New Economics Papers: this item is included in nep-agr, nep-dev and nep-env
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