Working Paper: NBER ID: w21086
Authors: Nittai K. Bergman; Rajkamal Iyer; Richard T. Thakor
Abstract: This paper tests financial accelerator models. Using a novel dataset on agricultural production, we examine how exogenous productivity shocks arising from variation in temperature are propagated into the future. We find that past weather shocks have persistent effects on land values and productivity up to two years following the shock. Propagation and amplification of productivity shocks are both significantly larger during the farm debt crisis of the 1980s and amongst farms in lower income counties. Finally, we find higher investment in farm equipment and decreased borrowing following a positive weather shock.
Keywords: Financial Accelerator; Agricultural Productivity; Weather Shocks; Farm Debt Crisis
JEL Codes: D24; E22; G31; Q14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Past weather shocks (Q54) | Current productivity (E23) |
| Past weather shocks (Q54) | Current land values (Q15) |
| Negative weather productivity shocks (Q54) | Lower current productivity (O49) |
| Negative weather productivity shocks (Q54) | Lower land values (R52) |
| Positive weather shocks (E32) | Increased investment in machinery (E22) |
| Increased investment in machinery (E22) | Greater productivity (O49) |
| Positive weather shocks (E32) | Reduced borrowing (G51) |
| Lower-income counties (I32) | Increased sensitivity to past shocks (E71) |