Climate Change, Risk and Grain Production in China
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This paper employs the production function-based method proposed by Just and Pope
(1978, 1979) to explicitly analyze production risk in the context of Chinese grain farming
and climate change, and test for a potential endogeneity of climate factors in Chinese
grain production.
Our results indicate that China might, at least in the short run, become a net beneficiary
of climate change. In particular, we find that increases in annual average temperature
increase mean output at the margin and at the same time lead to a reduction of production
risk. Further calculations suggest that a 1 °C increase in annual average temperature
would entail an economic benefit of $1.1 billion due to the increasing mean output.
Furthermore, a Hausman test reveals no endogeneity of climate variables in Chinese
grain production.