Climate Change, Risk and Grain Production in China

Abstract

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 potential endogeneity of climate factors in Chinese grain production. Our results indicate that grain production in south China might, at least in the short run, could be a net beneficiary of global warming. In particular, we find that a 1 °C increase in annual average temperature in South China could entail an increase of grain output by 3.79 million tons or an economic benefit of around USD 798 million due to the increasing mean output. However the impact of global warming in north China is negative, small and insignificant. In addition, Hausman tests reveal no endogeneity of climate variables in Chinese grain production.