Changes in the Agro-Climate Effects on Cereal Crop Yields: Panel Evidence from India (1972-2002) with Implications for

Sub-Saharan Africa
SSD Seminar Feb. 17th , 2012 Takuji W. Tsusaka Keijiro Otsuka

Copyright 2012 by Takuji W. Tsusaka and Keitjiro Otsuka. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided this copyright notice appears on all such copies.

Introduction
The Green Revolution (GR) in Asia
Growth in agricultural production consistently outpaced population growth, owing to the Green Revolution (e.g., Otsuka and Kalirajan, 2006).
Changes in Per-cap* Cereal Crop Production (Value-added)
Index: 1961=100 World

Key Factors for the GR

Modern Varieties (MVs): High-

yielding crop varieties suitable for the Sub Saharan Africa regional agro-climate; Especially wheat and rice varieties.
Southeast Asia South Asia

Irrigation: Stable and sufficient

supply of water.

Fertilizer: Intensive use of chemical

fertilizer.

Other: Markets (inputs/outputs),

* National

Source: FAOSTAT

infrastructure (e.g. road), credit, education.

The technological innovation and other complementary factors spurred the agricultural productivity in Asia, which led to rural poverty reduction (as well as non-farm sector growth).
(e.g., Otsuka et al., 2009; Lipton, 2007; Otsuka and Yamano, 2005; Fan et al., 2000) 1

Introduction
Agricultural Stagnation in Sub-Saharan Africa (SSA)
Staple food production has been increasing in SSA, but the rate of increase is not high enough and has been exceeded by its population growth.
Average Cereal Yields, 3-Year Moving Averages
(tons/ha)
6.0 5.0 4.0 3.0 2.0 1.0 0.0
69 72 75 81 84 87 90 93 96 99 05 66 19 19 19 19 19 19 19 19 19 19 19 02 63 20 20 19 19 20 08 78

Changes in Per-cap* Cereal Crop Production (Value-added)

(Index: 1961=100) World SSA Southeast Asia South Asia
100

North America

Asia South Asia North Africa SSA

* National Source: Calculation with FAOSTAT Data

SSA sees a decline in per-capita agricultural production.

2

Introduction
Why has SSA missed the GR? (1)
R&D Policies (&Governance) High-Yielding Varieties Irrigation (Water Management) Markets/Credit/ Infrastructure/ Education Agricultural Productivity Fertilizer Climate Endowments

One of the major constraints in SSA is its unfavorable (i.e.: dry) and diverse climate, since climate is a direct input for agricultural production (Omano, 2003; Mwabu and Thorbecke, 2004). Dry Climate: A number of studies show significant effects of climate on crop yields, particularly positive effects of rainfall (Seo and Mendelsohn, 2007; Auffhammer et al., 2006; Olesen and Bindi, 2002; Sanghi et al., 1998; Bruce et al., 1996; Reilly et al., 1996; Adams et al., 1995). Diverse Climate: It results in producing a broad range of staple crops, leading to limited scale benefit of investing in standard technical packages as in the case of Asia (Omano, 2003; Mwabu and Thorbecke, 2004).

Critics have long argued that there is limited potential to attain a GR in SSA due to its adverse climate endowments.

Introduction
Why has SSA missed the GR? (2)
R&D Policies (&Governance) High-Yielding Varieties Irrigation (Water Management) Markets/Credit/ Infrastructure/ Education Agricultural Productivity Fertilizer Climate Endowments

Other Constraints Under-developed Irrigation: irrigation and other water management systems have not been widely introduced in SSA (e.g. Hayami and Godo, 2005; Spencer, 1994). Insufficient Fertilizer Use: partly a consequence of high fertilizer prices due to poor infrastructure (e.g., road), and lack of credit and education. The adoption of improved technologies in SSA has been confined to limited regions under favorable conditions.
4

The Asian GR technology has been recognized as dependent on intensive and controlled supply of water and fertilizers.

Introduction
Any potential for African agriculture?
Some recent studies show that there is some potential for new technology adoption and crop yield improvement in SSA, which has just yet to be effectively exploited. Country-specific case studies on African agriculture point out that the rice yields will significantly increase once the constraints are properly addressed along with the adoption of modern technologies (Kajisa and Payongyon, 2008; Sakurai, 2006; Kijima et al., 2006;
Diagne, 2006; Goufo, 2008).

The Asian GR has been technology-led, and thus investments in agricultural research and extension would lead to growth in African agriculture (Otsuka and Kijima, 2010). In India, MVs of cereal crops were introduced in favorable areas at the initial stage of the GR. But, the MV adoption rate in unfavorable areas started to pick up at the later stage as technology continued to advance. (Byerlee, 1996; Fan and Hazell, 1999; Janiah et al., 2005; Gollin, 2004). Furthermore, In SSA, only <5% of the favorable wetlands are planted with MVs of rice (Balasubramanian et al., 2007). indicating a huge growth potential left unexplored.

Since all these studies are based on descriptive statistical analysis, a more formal econometric testing on the subject would confirm this argument.
5

Objective
Conventionally, the Asian GR technology has been recognized as a resourcedemanding technology which relies on the intensive use of water as well as fertilizers. The GR technology generally results in aggravating the adverse effect of harsh agro-climate on crop yields. Conversely, if newer technology adoption leads to a reduction in the agro-climate dependence of crop yields, that would make a positive case for the possibility of an African GR.

It is interesting and important to empirically explore whether and to what extent the influence of agro-climatic conditions on crop productivity has augmented or mitigated by the GR in Asia.

Contribution of The Study

The over-time changes in the impacts of agro-climate on crop yields, which have yet to be unveiled, are examined. Few studies on the subject have ever employed a panel data set that covers sufficient observations along cross-sectional, temporal, and crop-wise axes, due to the data constraints. This study uses a crop-by-crop district-level panel over a long period, which has at least three advantages over the existing studies:
The use of fixed (or random) effect can - control for the unobservable time-invariant district-specific effects, which can mitigate omitted variable problems - alleviate estimation biases which may arise, for example, from endogeneity of explanatory variables and sample selection. The long-term data set enables the assessment of the over-time changes in the impacts of climatic conditions. Yield functions are estimated for each individual crop and are compared with each other, which leads to finding the comparative advantage of one crop over others in certain production environments.

India vs. SSA

Proportion of Area Harvested to Cereal Crops (%)
2003-2007 Avg. SSA India
9

India Other Asia

1 1

70-73 Avg. 2~3

03-07 Avg.

Sorghum

24 12

21 47
8

18

19 35

Millet

23 42 44

Maize Rice Wheat Other*

34

32 10 3 6 27

Source: Calculation with FAOSTAT Data

Source: Calculation with CMIE Data

Indias diverse cropping patterns reflect its diverse agro-climate. The agricultural production environments (in some parts of India, if not all) are similar to those in SSA, which implies a technology transferability.
* Cassava, Teff, Potatos, Ragi, Oats, Barley and other

Bajra (Pearl Millet) Field in India

India vs. SSA

(tons/ha)
4.0 3.5 3.0 2.5

Combined Cereal Yields (3-year MA): India vs. SSA

Southeast Asia India

2.0 1.5 1.0 0.5 0.0

Sub-Saharan Africa

19

19

19

19

19

19

19

19

Despite the less favorable production environments, cereal crop yield in SSA was not significantly inferior to that in India until the early 80s. Today there is a gap of two-fold in cereal yield.
10

85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07
Source: Calculation with FAOSTAT Data

81

63

65

67

69

71

73

75

77

19

79

19

19

19

83

India vs. SSA

Cereal Yields (3-year MA) by Crop: India vs. SSA
Yield (tons/ha)
3.5

India
Rice

Yield (tons/ha)
3.5

Sub-Saharan Africa

3.0

3.0

2.5

Wheat
2.5

2.0

Maize

Wheat
2.0

1.5

1.5

Rice Maize Sorghum Millet

1.0

Millet Sorghum

1.0

0.5

0.5

0.0
6 9 2 3 8 0 5 1 3 6 4 7 19 6 19 6 19 7 9 19 9 20 0 19 7 19 8 19 9 19 7 19 6 19 8 19 9 19 8 19 9 2 20 0 5

0.0
19 69 19 63 19 66 19 75 19 78 19 81 19 84 19 87 19 90 19 93 19 96 19 99 20 05 20 02 19 72

Source: Calculation with FAOSTAT Data

Despite the much more favorable economic and climatic conditions in India, the yields for sorghum and millet are almost the same in both regions, indicating a limited transferability of the technology from India to SSA.

11

India vs. SSA

Cereal Yields by crop and their growth: India vs. SSA India
Yields (tons/ha) 61-63 Avg. Wheat Rice Maize Sorghum Millet 0.8 1.5 1.1 0.5 0.4 05-07 Avg. 2.5 3.3 2.3 0.8 0.9 Growth (times)

SSA
Yields (tons/ha) 61-63 Avg. 05-07 Avg. 2.1 1.8 1.6 1.0 0.9 Growth (times) India Yield SSA Yield 05-07 Avg.

3.0 2.1 2.1 1.7 2.1

0.7 1.3 1.0 0.8 0.6

3.1 1.4 1.5 1.4 1.5

1.2 1.9 1.4 0.8 1.0

Source: Authors calculation with FAOSTAT Data

The difference in current rice yield is huge, followed by maize. Room for the transfer of rice and maize technology? When it comes to sorghum and millet, there would be limited transferability of technology from Asia to SSA. In SSA, as far as the yield growth rate is concerned, a GR seems to be occurring in wheat, but not as much in the other crops. Possible to expand the wheat area?

12

Limitation of Wheat Expansion in SSA

Wheat production map of the world Temperate Zone and SSA
(Average percentage of land used for wheat production times average yield in each grid cell)

Wheat can be grown well only under a cool climate, which is associated with the temperate climate zone. In the African continent, the temperate climate zone is found only in limited part.

Wheat is thus grown only in the Republic of South Africa, the highlands in Ethiopia, and a few other regions, which is matched with the mere 3 percent of the total crop area planted to wheat.
13

Source: Compiled by the University of Minnesota Institute on the Environment with data from: Monfreda, C., N. Ramankutty, and J.A. Foley. 2008. Farming the planet: 2. Geographic distribution of crop areas, yields, physiological types, and net primary production in the year 2000. Global Biogeochemical Cycles 22: GB1022

India vs. SSA Evolution of Cropping Patterns

Area Harvested by Cereal Crop
Million ha

India
Other Maize Sorghum Millet Wheat

AAGR (%) -4.0 0.8 -1.7 -1.3 1.6

Million ha

SSA

Other Wheat Rice Millet Sorghum

AAGR (%) 0.5 -0.5 2.6 1.2

1.2

Rice

0.5

Maize

1.5

Source: Calculation with FAOSTAT Data

In India, the three GR crops seem to be replacing Millet and Sorghum.

In SSA, all crops except wheat are spreading. In particular, rice recently.
14

India in Focus: Diffusion of Irrigation and Modern Varieties

Proportion of Irrigated Area by Crop
1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 1970 1975 1980 1985 1990 1995 2000 2005

Proportion of Area Sown to MVs by Crop

1.0

Wheat

0.9 0.8 0.7

Sorghum Wheat Millet Rice Maize

Rice

0.6 0.5 0.4 0.3

Maize Millet Sorghum

0.2 0.1 0.0 1970 1975 1980 1985 1990 1995 2000

Source: CMIE Database

The irrigation coverage varies largely by crop, and it has not been increasing considerably over time.

There has been a rapid increase in area planted to MVs, even for sorghum and millet in recent years, though their yields are not growing.

15

India in Focus: Agro-Climate and Crop Choice

1998-2002 Five-Year Average
Wheat Temperature () Rainfall (mm) Irrigation (%)
Yield (kg/ha) # Districts

Rice 25.5 1,007 58

2,007 412

Maize 25.6

Sorghum 26.3 848 14

821 258

Millet 26.2 794 18

1,001 269

22-23 852 79
2,153 356

863 34
1,825 327

Sources: India Water Portal; CMIE Database

Millet and Sorghum are grown in drier and slightly warmer environments.
16

Data Source: India

District-Level Panel Data Construction Covering ~600 Districts
Variable Raw Data Area Sown (by crop) Agricultural Output (by crop) Temperature Rainfall MVs Adoption Rate (by crop) Irrigated Area (by crop) Literacy Rate Population Density Source CMIE CMIE India Water Portal of the MD CMIE (Not Available on District Level) CMIE X. Zhang, Datanet India K. Kumar, Datanet India

Yield (by crop)

Climate

Technology (by crop)

Controls

Notes: CMIE = Center for Monitoring Indian Economy Pvt. Ltd., MD = India Meteorological Department, X.Zhang@IFPRI , K. Kumar@WB

Commonly Available Years :1972-2002

The database is composed of five different sources, including private research corporations: CMIE and Datanet India.

17

Econometric Approach
Eliminate Sample Selection Bias by 2-Step Estimation (Heckman, 1979)

The inverse Mills ratio is calculated using the result of the probit estimation.
18

Econometric Approach

Since consistent data on technology (MV adoption rate and other) are unavailable on district level, it is assumed that the year dummies and the time trend variables capture the impacts of technology. The interaction terms between explanatory variables and time trend variables (e.g., Xt , Xt2) are meant to examine whether there have been over-time changes in the impacts of climate and other explanatory variables due to any technological change.
19

Theoretical Framework
1) Climate Effects on Crop Yield
Yield
The marginal effect is the slope of tangent on the yield curve. It may differ from place to place. It changes when agricultural technology changes

Yield Function

drought

flood

Climate Variable (e.g. rainfall, temperature)

2) Changes in Climate Effects

Yield Early MV TV ? Newer MV
Researchers claim that early generations of MVs are resource-demanding and sensitive to harsh agro-climate. How about newer MVs? Interesting to examine the changing impacts

Climate Variable (e.g. rainfall, temperature)

20

Regression Results for India, 1972 to 2002 Rice

Dependent Variable: Rice Yield (Ln) Estimated Coefficients on Selected Explanatory Variables:
Explanatory Variable Temp Temp t Temp t 2 Temp Irri Rainfall Rainfall t Rainfall t 2 Rainfall Irri Irri Irri t Irri t 2 Coefficients 0.1122 *** -0.0044 *** 0.0001 ** -0.0684 *** 0.5828 *** -0.0234 *** 0.0001 -0.1563 *** 3.1820 *** 0.0132 ** -0.0005 *** 0.0914 * -0.0014 0.0001 Yield

Temperature

Yield Function
(Initial)

Rainfall

Variable 1 C 11 % 1 % 0.58 % (elasticity=0.58) 1% pt. 3.2 % 1 % 0.09 % (elasticity=0.09)

Irrigation Coverage Population Density

PopDen PopDen t PopDen t 2

Statistical significance: *10%, **5%, ***1%

The positive impacts of temperature, rainfall, irrigation are found, which indicates the upward sloping part of the yield function of each variable. The result for population density is supportive of the induced innovation hypothesis of Hayami and Ruttan (1985) which states that as population increases, increasing scarcity of land induces the development and diffusion of land-saving and yield-enhancing technologies.

21

Regression Results for India, 1972 to 2002 Rice

Dependent Variable: Rice Yield (Ln) Estimated Coefficients on Selected Explanatory Variables:
Explanatory Variable Temp Temp t Temp t 2 Temp Irri Rainfall Rainfall t Rainfall t 2 Rainfall Irri Irri Irri t Irri t 2 Coefficients 0.1122 *** -0.0044 *** 0.0001 ** -0.0684 *** 0.5828 -0.0234 0.0002 -0.1563
*** *** * ***

Marginal Effect (=Dependence)

Avg. over the period

Temperature

Time

Rainfall

Irrigation Coverage Population Density

3.1820 *** 0.0132 ** -0.0005 *** 0.0914 * -0.0014 0.0001

Marginal Effect (=Dependence)

Avg. over the period

PopDen PopDen t PopDen t 2

Statistical significance: *10%, **5%, ***1%

Time

The impact of climatic variables decreases over time (at a diminishing rate): The predicted irrigation effect (%/% pt.) increases over time but slows down: 3.2 (72)

3.5 (86)

3.6 (02)
22

Regression Results for India, 1972 to 2002 Rice

Dependent Variable: Rice Yield (Ln) Estimated Coefficients on Selected Explanatory Variables:
Explanatory Variable Temp Temp t Temp t 2 Temp Irri Rainfall Rainfall t Rainfall t 2 Rainfall Irri Coefficients 0.1122 *** -0.0044 *** 0.0001 ** -0.0684 *** 0.5828 *** -0.0234 *** 0.0001 -0.1563 *** Marginal Effect of Climate (=Dependence on Climate)

Temperature

Irrigation

Rainfall

Statistical significance: *10%, **5%, ***1%

It is indicated that irrigation can reduce the dependence of rice yield on climatic factors, to some extent. The over-time changes in the impacts of climate are distinct from the influence of irrigation diffusion, since that influence is controlled for by the climate-irrigation interaction terms. Therefore, the critically important finding is that the dependence of rice yield on climate mitigated over time regardless of the availability of irrigation, which cannot be understood without considering the impact of the adoption of MVs with shorter maturity and drought-tolerance traits.
23

Regression Results for India, 1972 to 2002 Wheat, Maize, Sorghum, and Millet
Dependent Variable: Ln Yield Estimated Coefficients on Selected Explanatory Variables:
Explanatory Variable Temp Temp t Temp t 2 Temp Irri Rainfall Rainfall t Rainfall t 2 Rainfall Irri Irri Irri t Irri t 2

Wheat
-0.0162 -0.0031 ** 0.0000 0.0456 *** 0.3209 -0.0187 0.0004 -0.1291 -0.0698 -0.0018 -0.0003 0.1156 *** 0.0009 0.0000
*** *** *** ***

Maize
-0.0662 0.0085 -0.0002 0.0403
*** *** *** *

Sorghum
0.0401 * -0.0021 0.0001 -0.0305 0.5066 -0.0333 0.0007 0.1191
*** *** *** **

Millet
0.0561 * 0.0030 -0.0001 -0.1305 *** 0.2750 *** -0.0027 -0.0002 0.0782 3.2329 ** -0.0207 ** 0.0004 *** 0.0882 0.0090 ** -0.0003 *

Temperature

Rainfall

0.0709 * -0.0015 0.0000 0.0011 -0.9403 0.0051 -0.0003 -0.2112 *** 0.0127 *** -0.0001

Irrigation Coverage Population Density

0.4155 -0.0619 *** 0.0017 *** 0.1473 *** -0.0009 0.0000

PopDen PopDen t PopDen t 2

Statistical significance: *10%, **5%, ***1%

The impacts of climatic variables on crop yields decreased over time at a diminishing rate in several cases. At least, in no single case, the impact of climate augmented. Irrigation leads to a reduced climate dependence of crop yields. Induced innovation hypothesis is supported in all crops in recent years at least.

24

Concluding Remarks (1) Summary of the Findings

From the Descriptive Statistics
The gap in aggregate cereal yield between Asia and SSA was so minor until the early 1980s despite the much more favorable climatic, economic, and political conditions in Asia. The yield diversion occurred due to the adoption of improved technology in Asia and the failure of that in SSA. In other words, the Asian GR is likely to be a technology-led revolution. The Asian GR technologies were developed principally for wheat and rice, followed by maize. In fact, Indian farmers have been steadily replacing the lower-yielding crops (sorghum and millet) by the higher-yielding crops, which is one of the reasons why the compound cereal yield has been growing in India. Given the absence of the yield difference for sorghum and millet between Asia and SSA even today, the technology transferability from Asia to SSA for these two crops seems to be absolutely limited.

25

Concluding Remarks (1) Summary of the Findings

From the Regression Results
The impacts of climatic conditions (temperature and rainfall) on crop yields have reduced over time, due to the adoption of MVs and associated technologies. i. The impact of temperature, whether the average is positive or negative, declined for rice and maize. ii. The rainfall effect mitigated for wheat, rice, and sorghum. The traits of MVs have contributed to alleviating, not aggravating, the influence of climatic conditions, which is in contrast with the conventional notion that MVs are typically resource-demanding and are higher-yielding only under favorable environments.* Role of Irrigation i. Rice MVs require more irrigation water than do TVs. Interestingly enough, the rate of increase in irrigation effect is relatively large in the initial phase of the GR, but slows down in the later phase. ii. Irrigation works to mitigate the influence of climate endowments on crop yields. The induced innovation hypothesis proposed by Hayami and Ruttan (1985) is broadly supported. Continued population pressure is likely to have increased the relative profitability of land-saving and yield-enhancing technologies along the lines of the hypothesis.

*A possible reason is that the short maturity varieties can grow up in a shortened period during which rainfall is assured. It is also likely that improved drought tolerance of MVs reduces the downward yield risk, which leads to a decrease in the marginal effect in the low range of rainfall.

26

Concluding Remarks (2) Policy Implications

It is highly desirable to reverse the declining trend in the investment in international agricultural research activities, to enhance agricultural productivity in regions with unfavorable climates including SSA. Facing a tight budget for international agricultural research, crop-wise foci would be necessary to clarify policy priorities. i. Rice: A critically important implication of this study should be a focus on rice as a strategic crop in SSA, because of the abundant evidences of improved resistance to harsh climate, and the large gap in current yield between Asia and SSA, indicating an opportunity to transfer the Asian technology. ii. Maize: Since maize is the most widely cultivated crop in SSA, the productivity of maize farming must be enhanced. The advantage of maize crop is that the yield is not adversely affected by the unavailability of irrigation, meaning that maize has comparative advantage in rain-fed farming systems. Therefore, maize can be the second strategic crop after rice. Yet, it must be recognized that unlike rice, the maize technology developed in Asia is not conducive to weakening the impact of drought on maize yield. iii. Wheat: The limitation of wheat area expansion in SSA requires due attention in spite of its outstanding yield growth in the region. iv. Sorghum and Millet: There exists no difference in yield at all between Asia and SSA. Technologies for sorghum and millet in SSA are unlikely to be developed from the experiences in Asia.
27

Concluding Remarks (Contd) (2) Policy Implications

Try to switch from low-performing crops (sorghum and millet) to high-performing crops (wheat, rice, and maize), as it has been a driver for achieving growth in overall crop productivity in India. Also in SSA, by the mid-20th century, maize had immigrated and replaced much of sorghum and millet fields in Eastern and Southern Africa, partly because maize yielded more grain (Anthony 1988). Whether TVs or MVs, crop shift from sorghum and millet to rice and maize, wherever applicable, is strongly suggested for fostering the agricultural productivity growth in SSA. Investment in irrigation can be an effective measure for tackling harsh agro-climate endowments in SSA, as well as the looming threat of climate change.

28

Thank you very much for listening.

29

Appendix

30

Introduction
Importance of Agricultural Productivity in Developing Countries
Economic Growth Agricultural Productivity Poverty Reduction Food Security

Quotes:
(WDR, 2008)

3/4 of the poor in sub-Saharan Africa live in rural areas where agriculture is a dominant sector. 1 % decrease in agricultural GDP leads to a decrease in consumption of the three poorest decile groups by 4-6 %. (Ligon and Sadoulet, 2007) 33 % of the economic growth in sub-Saharan Africa from 1990 to 2005 comes from the agricultural sector. (WDR, 2007) 1 % increase in agricultural GDP leads to an increase in expenditure of the poorest deciles by >2.5 percent. The effect is superior to that of non-farm income. (Christiansen and Demery, 2007)

Agricultural productivity plays a critical role in economic growth, poverty reduction, food security in developing countries.
31

Introduction
Why has SSA missed the GR? (3)
R&D Policies (&Governance) High-Yielding Varieties Irrigation (Water Management) Markets/Credit/ Infrastructure/ Education Agricultural Productivity Fertilizer Climate Endowments

Declining Budget (Kuyvenhoven, 2008) Public spending on African agriculture, including R&D, has fallen to the record low of <7% of the agricultural GDP: vs. 11% in Asia and ~13% in Latin America. Donor support to agriculture in SSA has shrunk from $ 3-4 bio. in the late 1980s to $1 bio. in the late 2000s.

No hope for agriculture in SSA?

32

Contribution of this Study

The changes in the impacts of climate endowments have yet to be well known since the dynamic evidence has been scanty. 1) The (static) impacts of climate on agricultural crop yields. Somewhat known 2) The over-time changes in the impacts of climate endowments. Not well known

1) Impacts of Climate Endowments on Crop Productivity

Agronomic Yield Function Approach (a.k.a. Crop Modeling)

Method: Specific crops experience differing climate in laboratories. Then, Yields Data vs. Climate Data (temperature, precipitation, etc.) are collected. Shortcoming: Bias (i.e., unlikely to reflect possible adjustments by farmers) Result: Sensitive to Climate (e.g., Mendelsohn et al., 1994)

Cross Sectional Regression (a.k.a. Ricardian Approach)

Method: Empirically regress crop productivities (e.g., land prices) on climate variables, plus other controls.

33

Contribution of this Study

Cross Sectional Regression (Contd)
Result: Not as sensitive as in crop modeling approach. Mostly on developed countries due to the data availability: U.S. (Adams et al., 1995; Mendelsohn et al., 1994) Other developed countries (Olesen and Bindi, 2002; Bruce et al., 1996; Reilly et al., 1996) Statistically insignificant or significantly positive impact of rainfall Developing countries: India and Brazil (Seo and Mendelsohn, 2007; Sanghi et al., 1998). Negative impact of temperature and rainfall Shortcoming: Omitted variable problems (e.g., unobservable skills of farmers, soil quality) which could generate a bias of unexplained sign or magnitude.

34

Contribution of this Study

Panel Data Approach
Method: District Fixed effect/Random effect is controlled for. Shortcoming: Often unfeasible due to the data constraints, especially for developing countries. Result: ambiguous or negative impact of temperature US county-level analysis: Deschnes and Greenstone (2007), Schlenker and Roberts (2006) India state-level analysis: Auffhammer et al. (2006)

35

Contribution of this Study

Another Unique Aspect: Asia-Africa Comparison.
Although the quality and availability of data are inferior for the African study, the direct comparison can assess the difference in the progress of technology adoption in the two regions. The choice of India Similarities in agriculture between India and SSA Diversity in agro-climate, resulting in similar cropping patterns. Differing poverty incidence. Relatively small average farm size.

Although there are signs of hope documented in some case studies on agricultural technological situations in African countries (Diagne, 2006; Sakurai, 2006; Goufo, 2008; Kajisa and Payongayong, 2008; Kijima et al. ,2006), the real challenge is to translate individual successes into sustainable and systematic improvements in agricultural performance, which facilitate the identification of policy priorities. In order to achieve this goal, it is important to accumulate hard evidence to design appropriate development strategies (Otsuka and Kijima, 2010). This study, therefore, is expected to provide positive evidence through solid econometric analyses.

36

India in Focus: Irrigation and Crop Yields

1998-2002 Picture Wheat
Irrigation Coverage Low Temperature () Rainfall (mm) Yield (kg/ha)
# Obs for crop yield

Rice
Irrigation Coverage Low 24.6 1,127 1,418
178

Maize
Irrigation Coverage Low 25.1 895 1,630
215

Sorghum
Irrigation Coverage Low 26.2 877 836
224

Millet
Irrigation Coverage Low 26.1 811 964
228

High 25.7 809 2,365

291

High 25.9 920 2,455

234

High 26.1 802 2,198

112

High 25.4 658 720

34

High 25.7 701 1,207

41

23.4 1,045 1,203

65

Irrigation Coverage = % of Sown Area for each crop High > 50 %; Low < 50 %
Note: There are observations for which irrigation coverage is unknown Source: India Water Portal; CMIE Database

Clearly, irrigation coverage is higher in rain scarce districts. Even under dry climates, irrigation boosts the yields largely for wheat and rice, but not as much for the other crops.
37

India in Focus: Irrigation and Crop Yields

1971-1975 Picture Wheat
Irrigation Coverage Low Temperature () Rainfall (mm) Yield (kg/ha)
# Obs for crop yield

Rice
Irrigation Coverage Low 25.2 1,138 858
130

Maize
Irrigation Coverage Low 25.4 1,032 1,041
146

Sorghum
Irrigation Coverage Low 25.8 961 568
159

Millet
Irrigation Coverage Low 25.7 916 522
145

High 25.3 868 1,430

111

High 25.6 963 1,368

75

High 25.3 898 1,276

41

High 24.9 735 601

10

High 26.6 801 752

7

25.2 1,134 1,036

100

Irrigation Coverage = % of Sown Area for each crop High > 50 %; Low < 50 %
Note: There are observations for which irrigation coverage is unknown Source: India Water Portal; CMIE Database

Looking back at the early 70s, the role of irrigation did not seem as crucial as in the late 90s.
38

Data Source: SSA

Country-Level Panel Data Construction
Variable Raw Data Area Sown (by crop) Agricultural Output (by crop) Temperature (TBR) Rainfall (TBR) Nominal Price of Output Deflator Literacy Rate Population Density (TBR) Source FAOSTAT FAOSTAT GOSIC GOSIC FAOSTAT WDI UNESCO WDI

Yield (by crop)

Climate

Prices (by crop)

Controls

Notes: GOSIC = The Global Observing Systems Information Center of the U.S. TBR = To be replaced by new data.

The database covers :1967-2004

The database combines data from four public sources: Technology variables are unavailable over the long period. Moreover, the database has many missing observations across countries.
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Approach: SSA
Step 1 is dispensed with

For SSA, the sample selection model does not work out, probably because the number of cross-sectional observations is not large(~30) and each crop is grown in many of those countries. Thus, I directly perform the outcome estimations assuming that the biases are negligible. Otherwise, the methodology is largely the same as in the case of India, except that there is no data for irrigation, and price is available.

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Approach (Contd)
Consideration on Endogeneity
Iijt = Irrigated land area for crop i divided by total area sown to crop i (India)

Again, instruments are absent. However, in the early stage of the GR, most of the irrigation was gravity irrigation which was installed by the public sector. Therefore, irrigation can be considered fairly exogenous especially in the early stage. District-specific effect model may mitigate, if not eliminate, the endogeneity bias because irrigation investment can be determined based on time-invariant factors such as district-specific geography and environment.

It is assumed that the endogeneity of these variables is not serious in this analysis.
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Approach (Contd)
For SSA: Two Specifications for Yield Functions [Model 1]
With Year Dummies (from 1968 to 2004, 1967 as the base year)
Without Time Trend Variables

Two-way Fixed Effect Model

To absorb the average yearly change in yield that is not explained by the explanatory variables Aggregate macroeconomic and climatic shocks Overall technological improvements

[Model 2]
Without Year Dummies

With Time Trend Variables; t and t2 (t = 0 for 1967)

To capture the trend in general technological improvement and its acceleration (or deceleration) which is not picked up by the interaction terms (Xt and Xt2).

Four specifications for SSA: M1 w/o P; M2 w/o P; M1 w/P; M2 w/P

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Fixed Effect Regression Results for SSA, 1967 to 2004 Wheat Model 1: Year Dummies
Dependent Variable: Wheat Yield (Ln) Estimated Coefficients on Selected Explanatory Variables:
Without Price Explanatory Variable Temperature Temp Temp t Temp t 2 Rainfall Rainfall t Rainfall t 2 PopDen PopDen t PopDen t 2 Model 2: Time Trend With Price

Model 1
0.2699 *** -0.0229 *** 0.0004 *** -0.2229 0.0149 -0.0001 1.6184 ** -0.1279 *** 0.0017 ***

Model 2
0.0670 -0.0077 * 0.0001 -0.1300 * 0.0054 0.0001 1.3718 ** -0.0913 *** 0.0010 ***

Model 1
0.4518 *** -0.0277 *** 0.0004 *** -0.4205 0.0426 * -0.0007 * 0.1473 *** -0.0009 *** 0.0000 ***

Model 2
0.1445 * -0.0091 ** -0.0001 ** -0.1841 0.0199 -0.0003 0.0882 *** 0.0090 *** -0.0003 ***

Rainfall

Population Density

Statistical significance: *10%, **5%, ***1%

The impact of temperature is positive but decreases over time (at a diminishing rate). The impact of rainfall is almost insignificant. The effect of population density is initially very significantly positive, which is supportive of the induced innovation hypothesis. But the effect weakens over time. Exhaustion of technology?

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Fixed Effect Regression Results for SSA, 1967 to 2004 Rice Model 1: Year Dummies
Dependent Variable: Rice Yield (Ln) Estimated Coefficients on Selected Explanatory Variables:
Without Price Explanatory Variable Temperature Temp Temp t Temp t 2 Rainfall Rainfall t Rainfall t 2 PopDen PopDen t PopDen t 2 Model 2: Time Trend With Price

Model 1
-0.1485 ** 0.0136 *** -0.0002 *** 0.6256 *** -0.0413 ** 0.0006 * 1.4199 ** 0.0531 *** -0.0012 ***

Model 2
-0.1339 ** 0.0111 *** -0.0002 *** 0.5375 *** -0.0310 * 0.0005 1.6446 ** 0.0413 *** -0.0010 ***

Model 1
-0.1425 * 0.0136 *** -0.0003 *** 0.3229 -0.0200 0.0003 1.9960 ** 0.0460 ** -0.0011 ***

Model 2
-0.1154 * 0.0103 *** -0.0002 *** 0.1102 0.0005 0.0000 2.0197 *** 0.0334 ** -0.0009 ***

Rainfall

Population Density

Statistical significance: *10%, **5%, ***1%

The declining impacts of climate are found for rainfall as well as temperature. The effect of population density is very significantly positive, which is supportive of the induced innovation hypothesis. Unlike wheat, the effect increases over time (at a diminishing rate).
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Fixed Effect Regression Results for SSA, 1967 to 2004 Maize Model 1: Year Dummies
Dependent Variable: Maize Yield (Ln) Estimated Coefficients on Selected Explanatory Variables:
Without Price Explanatory Variable Temperature Temp Temp t Temp t 2 Rainfall Rainfall t Rainfall t 2 PopDen PopDen t PopDen t 2 Model 2: Time Trend With Price

Model 1
-0.0237 -0.0015 0.0000 0.6656 *** -0.0560 *** 0.0011 *** 0.1530 0.0225 ** -0.0004 *

Model 2
-0.0001 -0.0051 * 0.0001 0.5151 *** -0.0371 *** 0.0007 *** 0.3365 0.0101 -0.0001

Model 1
0.0815 -0.0093 *** 0.0001 * 0.1644 -0.0136 0.0004 -0.3977 -0.0076 0.0002

Model 2
0.0594 -0.0095 *** 0.0001 ** 0.1574 -0.0073 0.0002 -0.7004 -0.0076 0.0002

Rainfall

Population Density

Statistical significance: *10%, **5%, ***1%

The declining impacts of rainfall is found. Unlike wheat and rice, the effect of population density is mostly insignificant.
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Fixed Effect Regression Results for SSA, 1967 to 2004 Sorghum Model 1: Year Dummies
Dependent Variable: Sorghum Yield (Ln) Estimated Coefficients on Selected Explanatory Variables:
Without Price Explanatory Variable Temperature Temp Temp t Temp t 2 Rainfall Rainfall t Rainfall t 2 PopDen PopDen t PopDen t 2 Model 2: Time Trend With Price

Model 1
-0.1902 *** 0.0060 * -0.0001 0.1685 -0.0081 0.0000 -1.7672 *** 0.0023 0.0001

Model 2
-0.1392 *** 0.0017 0.0000 0.0415 0.0064 -0.0002 -1.5738 *** -0.0122 0.0004 **

Model 1
-0.1138 * 0.0012 0.0000 0.2404 -0.0065 0.0000 0.5120 -0.0486 *** 0.0009 ***

Model 2
-0.1041 * -0.0002 0.0000 0.1634 0.0077 -0.0003 0.4091 -0.0529 *** 0.0010 ***

Rainfall

Population Density

Statistical significance: *10%, **5%, ***1%

The declining impact of temperature is found in Model 1 without price. The impact of rainfall is totally insignificant. The induced innovation hypothesis is not supported for sorghum in SSA.
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Fixed Effect Regression Results for SSA, 1967 to 2004 Millet Model 1: Year Dummies
Dependent Variable: Millet Yield (Ln) Estimated Coefficients on Selected Explanatory Variables:
Without Price Explanatory Variable Temperature Temp Temp t Temp t 2 Rainfall Rainfall t Rainfall t 2 PopDen PopDen t PopDen t 2 Model 2: Time Trend With Price

Model 1
-0.1822 ** 0.0057 -0.0001 0.2547 -0.0217 0.0005 ** -0.1933 -0.0092 0.0002

Model 2
-0.0986 0.0024 0.0000 0.1610 -0.0132 0.0004 -0.0358 -0.0172 * 0.0004 *

Model 1
0.0405 -0.0108 ** 0.0001 * 0.1788 -0.0266 0.0007 * -0.4396 0.0084 -0.0001

Model 2
0.0818 -0.0102 ** 0.0001 0.0360 -0.0101 0.0004 -0.2293 -0.0032 0.0002

Rainfall

Population Density

Statistical significance: *10%, **5%, ***1%

The declining impacts of climate is not found for millet in SSA. The impact of rainfall is totally insignificant. The induced innovation hypothesis is not supported for millet in SSA.
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Is It Actually Technology That Mattered?

The results strongly indicate that the impact of climatic factors on crop yields have declined over time, for wheat, rice, maize, and sorghum, after the irrigation effects are controlled for (in India). Although it seems reasonable to assume that technological progress represented by the adoption of highyielding MVs and other improved production practices has contributed to these over-time changes, it is not directly proven by the regression analyses since the time trend variables can reflect the effects of a variety of factors including infrastructure, among other things. The difficulty is that technology variables, such as MV adoption rate, are unavailable at the district level in the case of India. Moreover, even if those variables were available, their used would entail a problem of endogeneity bias, which would not be easy to correct for.

One attempt to obtain a more direct evidence of the impact of technology is to use irrigation as a proxy for the compound effects of irrigation and MVs if the correlation between irrigation rate and MV adoption rate is high. Thus, I propose to investigate the relationship between MV adoption rate and irrigation rate using the state-level data.

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Is It Actually Technology That Mattered? (Contd)

Coefficient of Correlation between Modern Variety Adoption Rate and Irrigation Rate, State-wise, by Crop, Three-Year Moving Averages

Period 1974-1988 1989-2002

Wheat 0.76 0.38

Rice 0.79 0.35

Maize 0.62 0.46

Sorghum -0.27 -0.08

Millet 0.30 0.09

Source: Authors calculation with data from Indiastat and Center for Monitoring Indian Economy.

This trend is supported by preceding studies by Janaiah et al.(2006), Gollin (2006), and Byerlee (1996), stating that MVs were adopted primarily in irrigated areas in the early phase of the GR.

Use district-level irrigation rate for wheat, rice, and maize in the early phase of the GR, as a proxy for district-level MV adoption rate.
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Regression with the Proxy Variable: India

Dependent Variable: Ln Yield Time Period: 1974 to 1988 Estimated Coefficients on Climate Variables:
Explanatory Variable Temperature Temp Temp t Temp Irri (Tech) Rainfall Rainfall t Rainfall Irri (Tech)

Irrigation = Technology Indicator

Wheat
-0.0211 -0.0057 *** 0.0440 0.2168 *** -0.0141 *** 0.0635

Rice
0.1135 *** -0.0048 *** -0.0635 0.5693 *** -0.0046 -0.3741 ***

Maize
0.0707 * -0.0017 0.0182 0.0412 0.0083 ** -0.0071

Rainfall

Irrigation Coverage

Irri (Tech) Irri (Tech) t

-0.3754 -0.0083

4.3988 *** 0.0059

-0.4557 0.0171 **

Statistical significance: *10%, **5%, ***1%

It is confirmed that the rainfall elasticity of rice yield decreases by 0.0037 when the MV adoption rate increases by 1 percentage points. Difficulty: Early generations of MVs may be more resource-demanding.

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Concluding Remarks (Contd) (3) Remaining Issues

Variables that directly represent technology adoption are missing in the analyses. i. ii. Only the state level MV adoption rate is available in Indias descriptive statistics. The MV adoption rate, even if it is available, does not express the quality of the MVs, and thus, does not reflect the continuous improvement in the traits of MVs. The MV adoption rate may understate the actual effect of available technology on crop yields.

iii. The impact of MVs of sorghum and millet on yields is unclear since the recently surging MV adoption rates for these two crops do not lead to the yield growth apparently. The MV adoption rate, in this sense, may overstate the actual effect of available technology. Finding a much more refined indicator of technology would produce more reliable results. The regressions employed in the analyses are not weighted regressions: i.e., all the districts in India, larger ones and smaller ones, are treated with equal importance. So are all the countries in SSA. Since there are major and minor districts and countries, it may be preferable to contrive a measure to take some weighting factor into account, especially for SSA where countries of a range of economic sizes are included.

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Concluding Remarks (Contd) (3) Remaining Issues

The quality and availability of the data for SSA have to be improved if possible. i. The number of cross-sectional observations is limited and many small countries are left out of the regressions. The price variable employed in the SSA analyses should be refined, in terms of both quality and availability.

ii.

iii. Another suggestion may be using rural population density in place of national population density in the country as a whole, since most of agriculture is undertaken by rural farmers. Throughout this study, the agricultural productivity is expressed in terms of the physical crop yield. Although it would be a daunting task, expressing the productivity in monetary term or using total factor productivity, instead of physical crop yield, may be an intellectually stimulating challenge.

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