Impacts of Climatic Variability on Agricultural Total Factor Productivity Growth in the Southern United States

Abstract

This study investigates the impact of climatic variability on both agricultural production and total factor productivity (TFP) in the Southern United States (US). It also aims at identifying the drivers of productivity in this region. The analysis is tailored to inform decision makers about effective policy options to increase and sustain productivity in this important agricultural region. We use data from the US Department of Agriculture, National Climatic Data Center, and US Geological Survey to estimate alternative stochastic production frontier models. The estimated parameters are then analyzed and used to compute and decompose TFP into several measures of efficiency. The results show that agricultural production in the Southern US is more responsive to labor and has been increasing at a 1.13 percent rate annually. The findings also suggest that while precipitation, on average, has a positive and significant impact on productivity, intra-annual variation in both temperature and precipitation, which can be considered as anomalies, has a negative and significant impact on production. The impact of climatic effects on productivity across states is mixed and technological progress has been the main driver of TFP growth. Findings indicate that climatic variability is having a negative impact on agricultural productivity in the Southern US, similar in magnitude to the positive impact of irrigation.