An official website of the United States government
Ancient farmers experienced climate change at the local level through variations in the yields of their staple crops. However, archaeologists have had difficulty in determining where, when, and how changes in climate affected ancient farmers. We model how several key transitions in temperature affected the productivity of six grain crops across Eurasia. Cooling events between 3750 and 3000 cal. BP lead humans in parts of the Tibetan Plateau and in Central Asia to diversify their crops. A second event at 2000 cal. BP leads farmers in central China to also diversify their cropping systems and to develop systems that allowed transport of grains from southern to northern China. In other areas where crop returns fared even worse, humans reduced their risk by increasing investment in nomadic pastoralism and developing long-distance networks of trade. By translating changes in climatic variables into factors that mattered to ancient farmers, we situate the adaptive strategies they developed to deal with variance in crop returns in the context of environmental and climatic changes.
more »
« less
Volatility and the Gains From Trade
Trade liberalization changes the volatility of returns by reducing the negative correlation between local prices and productivity shocks. In this paper, we explore these second‐moment effects of trade. Using forty years of agricultural micro‐data from India, we show that falling trade costs due to expansions of the Indian highway network reduced the responsiveness of local prices to local yields but increased the responsiveness of local prices to yields elsewhere. In response, farmers shifted their production toward crops with less volatile yields, especially so for those with poor access to risk mitigating technologies such as banks. We then characterize how volatility affects farmers' crop allocation using a portfolio choice framework where returns are determined in general equilibrium by a many‐location, many‐good Ricardian trade model with flexible trade costs. Finally, we structurally estimate the model—recovering farmers' risk‐return preferences from the gradient of the mean‐variance frontier at their observed crop choices—to quantify the second‐moment effects of trade. The simultaneous expansion of both the highway and rural bank networks increased the mean and the variance of farmer real income, with the first‐moment effect dominating such that expected welfare rose 4.4%. But had rural bank access remained unchanged, welfare gains would have been only half as great, as risk mitigating technologies allowed farmers to take advantage of higher‐risk higher‐return allocations.
more »
« less
- Award ID(s):
- 1658838
- PAR ID:
- 10383103
- Date Published:
- Journal Name:
- Econometrica
- Volume:
- 90
- Issue:
- 5
- ISSN:
- 0012-9682
- Page Range / eLocation ID:
- 2053 to 2092
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
More Like this
-
-
There has been increasing interest in low-carbon technologies to reduce climate change impacts. However, careful assessments of their implications for the vibrancy of local economies are rare. This paper employs techno-economic analysis to assess the technical and economic feasibility of investment in one such technology: local green ammonia production and its contribution to the economic viability of the local economy. The analysis considers price projection and debt financing options, and alternative energy-to-ammonia technologies. The approach is broadly applicable and is illustrated here using a case study in which 248,188 MT of traditional ammonia are replaced with local wind energy-produced ammonia for farmers in Southwest Kansas, United States. Economic feasibility is defined as the ability to accrue enough discounted cash flow at the end of the turbines’ 25-year lifespan to enable their replacement. The alternative technologies are the traditional Haber-Bosch and the emerging solid oxide electrolysis cell (SOEC). The total plant capital cost amounted to $781.72 million while the plant operating costs were set at $100/MT with the energy supplied by the project’s energy system. The results show how economic feasibility sensitivity to technology and financing options are evaluated and communicated to scientists, policymakers, and farmers. The 6.5 MWh/MT wind energy-to-ammonia SOEC technology presented the best economic results under all price projections. The community’s investment yielded the highest return when debt was used to finance 50% of the capital investment. Returns exceeded the average annual S&P return of about 7% from 1957 to 2021. The work shows how consideration of technology efficiencies and creative financing strategies can contribute to the economic welfare of farmers and their communities even as they contributed to reducing crop production’s carbon footprint.more » « less
-
Ahmed, Ferdous (Ed.)This study examines the lived experiences and adaptation strategies of small-scale farmers in the southwestern Brazilian Amazonian state of Rondônia, amidst escalating climate challenges. Through nine in-depth interviews, it uncovers the impact of unpredictable weather, increased temperatures, and shifting precipitation on agriculture and livelihoods. Participants, ranging from family farmers to agricultural collective members, detail shifts from traditional crop cultivation to more resilient practices like cattle ranching and dairy production. The narratives reveal a deep understanding of local climate volatility and its direct effects on water availability, crop viability, and livestock productivity. Farmers describe adaptation measures including new crop varieties, irrigation systems, and strategic land use to enhance biodiversity and mitigate climate change effects. Despite these adaptations, challenges like water scarcity, high input costs, and the need for technical assistance remain prominent. Farmers emphasize the need for stronger support systems, highlighting community solidarity, governmental aid, and access to sustainable technologies and education as essential for climate adaptation. They call for policies providing equitable resources and support, underscoring the importance of inclusive climate governance that acknowledges the unique vulnerabilities and contributions of Rondônia’s agricultural sector. This research contributes to understanding how climate change reshapes rural Amazonian communities, arguing that ongoing deforestation and climatic changes threaten regional agricultural stability. It advocates for targeted policy interventions to provide technical assistance for sustainable farming and climate adaptation, alongside mechanisms to support fair market pricing. These measures are essential for enhancing the resilience and sustainability of local farming communities amidst climate change.more » « less
-
CONTEXT Sub-Saharan Africa (SSA) has the climatic and biophysical potential to grow the crops it needs to meet rapidly growing food demand; however, agricultural productivity remains low. While potential maize yields in Zambia are 9 t per hectare (t/ha), the average farmer produces only 1–2. OBJECTIVE We evaluate the contribution of responses to weather risk to that gap by decomposing the yield gap in maize in Zambia. While we know that improved seed and fertilizer can expand yield and profit, they may also increase the variance of yield under different weather outcomes, reducing their adoption. METHODS We use a novel approach combining crop modeling and statistical analysis of survey data to obtain the yield gap components in Zambia driven by input cost and input risk. We use a crop model to simulate district-level marginal effects of fertilizer and seed maturity choice on the mean and variance of expected yield and profit under all-weather outcomes for each district for the past 30 years. We compare input levels that maximize expected yield to those that maximize expected profit and maximize the expected mean-variance trade-off assuming risk-aversion. To determine how much farmers' input choices are made to reduce risk, we then quantify differences in the expected riskiness of inputs by district. RESULTS AND CONCLUSIONS We find approximately one-quarter of the yield gap can be explained by risk-reducing behavior, albeit with a substantial geographic variation. Given this finding, under present conditions, we expect that the average maximum yield that farmers can obtain without increasing risk is 6.75 t/ha compared to a potential profit-maximizing level of 8.84 t/ha. SIGNIFICANCE The risk-related yield gap is only expected to increase with weather extremes driven by climate change. Promoting “one-size-fits all” solutions to closing the yield gap could underestimate the effect of risk mitigation on agricultural production while increasing farmers' risk exposure.more » « less
-
Abstract Global grain trade plays a key role in food security. Many nations rely on imported grain to meet their dietary requirements. Grain imports may be at risk due to weather shocks, economic crises, or international conflicts. Countries aim to balance import risk with the expected return of their grain supplies. This research brings these dual objectives together in an innovative modern portfolio theory framework. Modern portfolio theory provides a set of concepts to formulate the trade-off between risk and expected return in national grain imports. Using Markowitz’s mean-variance optimization model, we identify opportunities to reduce risk in existing national grain import accounts, without increasing costs under realistic supply mass constraints of trade partners. Several major grain importers may be able to reduce risk in their grain imports without increasing cost, such as wheat imports in Egypt, maize imports in Vietnam, and rice imports in Saudi Arabia. However, some countries would indeed have to pay more to achieve more stable grain supplies, such as wheat imports in Turkey. This study provides a framework to quantify the different costs, benefits, and levels of risk in grain trade that can inform future research and decision-making.more » « less
- Free Publicly Accessible Full Text
-
Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.3982/ECTA14411
