How Weather Affects the Decomposition of Total Factor Productivity in U.S. Agriculture
Sergio Lence and
ISU General Staff Papers from Iowa State University, Department of Economics
Despite the major role of climate in agricultural production, few studies have analyzed how weather fluctuations affect the measurement and decomposition of Total Factor Productivity (TFP). This article proposes a novel framework to decompose TFP change accounting for the influence of weather. Specifically, we estimate the contribution of weather variations, technical change, technical and allocative efficiency, as well as markup, scale and price effects to TFP change. The underlying technology is represented by a multi-input, multi-output flexible input distance function with quasi-fixed inputs of production, and is estimated for major U.S. producing regions using Bayesian methods. To assess the role of weather in the decomposition of TFP growth, we contrast findings from our proposed method with those of a baseline model that ignores weather effects. Overall, our TFP growth estimates are highly similar to those obtained from official USDA indices. However, we find that the contribution of non-weather components to TFP is 14% lower when we account for weather variations. This weatherrelated bias is particularly strong in the Central region of the country. This overestimation of TFP growth that is attributable to non-weather components in previous research thus implies that estimated rates of return to public R&D are also overestimated, which has profound policy implications. This is the first study to document how ignoring weather can bias the decomposition of TFP change estimates.
New Economics Papers: this item is included in nep-eff and nep-env
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://lib.dr.iastate.edu/cgi/viewcontent.cgi?art ... t=econ_workingpapers
Journal Article: How weather affects the decomposition of total factor productivity in U.S. agriculture (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:201911120800001087
Access Statistics for this paper
More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().