The Impact of Climate Change on Indian Agriculture

This paper estimates the economic impact of climate change on Indian agriculture. I estimate the e¤ect of random year-to-year variation in weather on agricultural output using a 40-year district-level panel data set covering over 200 Indian districts. These panel estimates incorporate farmers’within-year adaptations to annual weather shocks. I argue that these estimates, derived from short-run weather e¤ects, are also relevant for predicting the medium-run economic impact of climate change if farmers are constrained in their ability to recognize and adapt quickly to changing mean climate. The predicted medium-run impact is negative and statistically signi…cant: I …nd that projected climate change over the period 2010-2039 reduces major crop yields by 4.5 to nine percent. The long-run (2070-2099) impact is dramatic, reducing yields by 25 percent or more in the absence of long-run adaptation. These results suggest that climate change is likely to impose signi…cant costs on the Indian economy unless farmers can quickly recognize and adapt to increasing temperatures. Such rapid adaptation may be less plausible in a developing country, where access to information and capital is limited. Keywords: climate change, India, agriculture, panel data JEL Classi…cation Codes: L25, Q12, Q51, Q54 I thank my advisors, Esther Du‡o and Michael Greenstone, for their encouragment and guidance. I thank C. Adam Schlosser of MIT’s Center for Energy and Environmental Policy Research for guidance with the NCC data set and Kavi Kumar of the Madras School of Economics for guidance with the World Bank India Agriculture and Climate Data Set. Nivedhitha Subramanian and Henry Swift provided excellent research assistance. I thank Daron Acemoglu, Miriam Bruhn, Jessica Cohen, Greg Fischer, Rick Hornbeck, Jeanne LaFortune, Ben Olken, José Tessada, Robert Townsend, Maisy Wong and participants in the MIT Applied Microeconomics Summer Lunch and the Harvard Environmental Economics Lunch for their comments. yMIT E52-391, 77 Massachusetts Avenue, Cambridge, MA, 02139; e-mail: [email protected]