The economic impacts of technology and climate change: New evidence from US corn yields

Over the past century, U.S. farmers have been offered a steady stream of new agricultural technologies, and more recently, experienced climate change. Because these two events have been occurring simultaneously, identifying their separate effects is difficult, and misimputation is easy. This article explicitly examines the economics of technical change and the interaction between weather and technology as revealed in a half century of panel data on U.S. Midwest rainfed state-average corn yields. Observed yields reflect two components: yield potential and damage to the potential caused by weather and pests. Yield potential is modeled as a stochastic production frontier where nitrogen fertilization, public corn research, and introduction and adoption of biotech corn seeds impact yield potential and excess heat impacts nitrogen productivity. The yield-damage/damage-control function permits biotech corn plants to abate adverse effects of weather and pest events. Results include the following: nitrogen use, public corn research, and biotech seed-corn adoption increase yield potential; soil moisture stress reduces yield potential, and excess heat severely reduces nitrogen productivity. Biotech corn plants abate yield damage caused by soil moisture stress but not excess heat.