Dynamic Adjustment in U.S. Agriculture under Climate Uncertainty

We construct a stochastic dynamic dual model to investigate the structural adjustment of two aggregate output and three aggregate input categories in U.S. agriculture under climatic change uncertainty. A century of national annual data (1910-2011) is used in the empirical analysis. No constraints on asset fixity are imposed. Results indicate that both output categories as well as all input categories exhibit quasi-fixity in response to market change and stochastic climate change. Crops adjust most rapidly toward equilibrium levels and capital adjusts most slowly.