Global warming and German agriculture

This study uses the concept of shadow prices for measuring the impacts of climate change. By estimating a restricted profit function rather than a cost or a production function the explanatory power of the model is increased because of an endogenous output structure. Using low aggregated panel data on Western German farmers, the results imply that the agricultural production process is significantly influenced by climate conditions. Simulation results using a 2 × CO2 climate scenario show positive impacts for all regions in Germany. Interestingly, the spatial distribution of the gains is indicating no advantage for those regions, which currently suffer from insufficient temperature. Finally, the importance of an endogenous output structure is confirmed by the finding that the desired product mix will drastically change.