Extreme Weather Events and Agricultural Total Factor Productivity Growth

ABSTRACT The productivity of the agricultural sector is crucial for food security in a changing climate. This study estimates the impacts of extreme weather events on agricultural total factor productivity (TFP) growth, contributing to a more comprehensive understanding of the effects of climate change on agriculture. Using a dynamic panel data model, I estimate both the contemporaneous and cumulative long‐run effects of extreme weather on TFP growth. The estimates suggest that extreme weather events have on average a negative and statistically significant impact on agricultural TFP growth rate. In a year when the total number of extreme weather events is at the sample mean, the TFP growth rate would be lowered by approximately 0.53 percentage points, with a smaller cumulative long‐run effect of 0.40 percentage points. Across event types, the estimated impacts are all negative and are statistically significant for storms, droughts, and wildfires in most specifications. The estimates are robust across measures of extreme weather, model specifications, and subsamples. I also show that extreme‐weather‐induced loss in TFP growth is mainly driven by reductions in output growth, while the impacts on input growth vary across event types.