DP16194 Estimating the Consequences of Climate Change from Variation in Weather

Author(s): Derek Lemoine
Publication Date: May 2021
Keyword(s): Adaptation, Agriculture, Climate, Forecasts, indirect least squares, Weather
JEL(s): C23, Q12, Q51, Q54
Programme Areas: Occasional Paper
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16194

I formally relate the consequences of climate change to the panel variation in weather extensively explored by recent empirical literature. I show that short-run responses to weather shocks differ from long-run responses to climate change when payoffs depend on a capital or resource stock. I develop a new indirect least squares estimator that bounds long-run climate impacts from short-run responses to weather. Applying this new method, I find that an additional 2 degrees Celsius of global warming would eliminate profits from the average acre of current farmland in the eastern U.S.