The effects of climate change on crop and livestock choices

This paper investigates the effect of climate change on crop and livestock choices using two discrete choice models: Multinomial Logit (MNL) and Nested Logit (NL) models. Taking advantage of a new-plot level dataset for Mexico we identify the effect of climate on agriculturalists observed choices. Using Geographical Information Systems (GIS) we combine data on 31 types of crops and livestock encountered in 219,985 and 168,265 plots corresponding to the 2012 and 2014 agricultural years with climate data. Also included in the analysis are the expected output and input prices, soil types, indicators of access to markets and information, socio-demographic characteristics of the farmer, and subsidy payments. We find strong evidence about the inappropriateness of the Independence of Irrelevant Alternatives (IIA) assumption underpinning the MNL model. This finding leads to remarkable differences in the predictions from the MNL and NL models. Speculations about the effect of climate change on farmers choices suggest that in the event of a warmer and drier future, Mexican agriculturalists will move their production efforts from alfalfa, cacao, beef cattle, grapes, onions, oranges, red tomato, soy, and sugar cane to bananas, barley, lemon, squash and potatoes. Acknowledgement