Agricultural productivity growth in Latin America and the Caribbean and other world regions: an analysis of climatic effects, convergence and catch-up

Agricultural productivity growth in Latin America and the Caribbean and other world regions: an analysis of climatic effects, convergence and catch-up

The agricultural sector plays a critical role in the economy of Latin American and Caribbean (LAC) countries. However, agricultural productivity in LAC countries is facing the rising challenge imposed by climate change, natural resource depletion and environmental degradation. For instance, recent data from FAO (2010) reveals that South America had the largest worldwide net loss of forests between 2000 and 2010, estimated at 4.0 million hectares per year.
 
This study estimates Climate Adjusted Total Factor Productivity (CATFP) for agriculture in Latin America and Caribbean (LAC) countries, while also providing comparisons with several regions of the world. Climatic variability is introduced in Stochastic Production Frontier (SPF) models by including average annual maximum temperature, precipitation and its monthly intra-year standard deviations, and the number of rainy days.

Climatic conditions have a negative impact on production becoming stronger at the end of the 2000s compared to earlier periods. An Error Correction Model is applied to investigate catch-up and convergence across LAC countries. Argentina defines the frontier in LAC and TFP convergence is found across all South American countries, Costa Rica, Mexico, Barbados and The Bahamas. Using IPCC 2014 scenarios, the study shows that climatic variability induces significant reductions in productivity (2.3% to 10.7%), over the 2013-2040 period. Estimated output losses due to climatic variability range from 9% to 20% in the LAC region depending on the scenario considered.
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