The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random

This paper measures the economic impact of climate change on US agricultural land by estimating the effect of random year-to-year variation in temperature and precipitation on agricultural profits. The preferred estimates indicate that climate change will increase annual profits by $1.3 billion in 2002 dollars (2002$) or 4 percent. This estimate is robust to numerous specification checks and relatively precise, so large negative or positive effects are unlikely. We also find the hedonic approach—which is the standard in the previous literature—to be unreliable be-cause it produces estimates that are extremely sensitive to seemingly minor choices about control variables, sample, and weighting. (JEL L25, Q12, Q51, Q54) There is a growing consensus that emissions of greenhouse gases due to human activity will lead to higher temperatures and increased pre-cipitation. It is thought that these changes in climate will have an impact on economic well-being. Since temperature and precipitation are direct inputs in agricultural production, many believe that the largest effects will be in this sector. Previous research on climate change concerning the sign and magnitude of its effect on the value of US agricultural land is incon