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Abstract
Global warming has been an issue lately in many aspects because it has been in increasing trend
since 1980s. This paper estimates the climate change effects on U.S. agriculture using the pooled
cross-section farm profit model. The data are mainly based on the annual Agricultural Resource
Management Survey (ARMS) from USDA for the time period between 2000 and 2009 in the 48
contiguous States. For climate measure, growing season drought indices (the Palmer Drought
Severity Index (PDSI) and Crop Moisture Index (CMI)) are applied to the analysis and both
indices have a negative relationship with temperature. The estimates indicate that one unit
increase in PDSI (CMI) leads to 5.5% (13.9%), 4% (9%), and 5% (14%) increase in farm profits
for all farms, crop farms, and livestock farms. This paper provides several contributions to the
literature. First, the data set is very rare and unique national survey that provides an individual
farm level observation. Therefore, it gives more detailed farm structure and financial information
for the analysis compared to other studies. Second, drought indices (PDSI and CMI) are used for
estimating the impact of weather on farm profits while temperature, precipitation, and growing
degree-days are typical weather variables in literatures.