Factor Markets and Adaptation to Climate Change: Evidence from Minnesota and Wisconsin Farmland Transactions

Land markets allow for the reallocation of economic activity across space and firms, potentially facilitating climate change adaptation. Whether market transactions actually lead to an improved climate response and, if so, how, remains unknown. I combine data on the universe of real estate transaction in Minnesota and Wisconsin with parcel maps and satellite imagery to measure the impact of farmland transactions on productivity, climate adaptation, and adoption of management practices. Transactions almost completely eliminate the negative yield response to extreme temperatures and initiate a gradual 1.5% increase in output per acre. Despite substantial changes in productivity, changes in management practices are minimal. These findings suggest that differences in human capital among farm owners explain a large amount of variation in agricultural productivity and climate sensitivity.