Academic journal article Journal of Agricultural and Applied Economics

Hurricanes and Possible Intensity Increases: Effects on and Reactions from U.S. Agriculture

Academic journal article Journal of Agricultural and Applied Economics

Hurricanes and Possible Intensity Increases: Effects on and Reactions from U.S. Agriculture

Article excerpt

Hurricanes have caused substantial damage in parts of the U.S. Damages are increasing, perhaps as part of a natural cycle or perhaps in part related to global warming. This paper examines the economic damages that hurricanes cause to U.S. agriculture, estimates the increased damage from an increase in hurricane frequency/intensity, and examines the way that sectoral reactions reduce damages. The simulation results show that hurricanes and associated adjustments cause widespread damage and redistribute agricultural welfare. We find that crop mix shifts of vulnerable crops from stricken to nonstricken regions significantly mitigate hurricane damages.

Key Words: crop mix, hurricane intensity, stochastic agricultural sector model

JEL Classifications: Q24, Q54, R14

Recent hurricanes have caused substantial damage in the U.S. and Mexico, as well as Central and South America. In 2005, Hurricane Katrina resulted in property damage of $81.2 billion while Hurricane Andrew in 1992 caused about $44.9 billion in property damage (Burton and Hicks; Pielke and Landsea; USDA). The major categories of damage have included structural damage, destroyed equipment, and interrupted business. However, hurricanes also affect environmental conditions, species dis- tribution, forests, crops, and wetlands. There is substantial debate as to whether hurricanes are strengthening either because of natural cycles or climate change (Webster et al.). This raises the issue of what would be the cost if the fre- quency and/or intensity of hurricanes were to strengthen, regardless of the causal factors. This paper examines this issue by investigating the economic consequences for agriculture of the incidence of hurricanes and their possible strengthening.

The economic damage caused by hurricanes has been examined by several studies. Hallstrom and Smith used a hedonic approach to estimate property value damage under Hurricane Andrew and found that property values were reduced by 19%. Bin and Polasky estimated the flood hazard effects of Hurricane Floyd on property values, while Pinelli et al. estimated the damage induced by hurricane force winds on residential structures. Regional and local economic impact studies were performed by both West and Lenze and Burrus et al.

While the local and regional agricultural economic impacts of hurricanes have been examined (Guidry; Herndon et al.), in specific cases, the broad agricultural sector economic impacts of hurricanes have not received detailed research attention and the national implications have largely been overlooked. For example, hurricane-induced damage to Louisiana rice production may result in increases in the price of rice and result in positive benefits to rice farmers elsewhere. Furthermore, a long-term increase in hurricane frequency may alter changes in crop mix and bring about a possible shifting of production spatially.

Some studies (Paarlberg, Seitzinger, and Lee; Pendell et al.) estimate economic damage of infectious diseases or disasters on a regional level while Paarlberg, Lee, and Seitzinger and Brown et al. estimate its effects on a national level. This study estimates the economic impacts of hurricanes on the U.S. agricultural sector as well as their possible strengthening, while also examining both their regional and national implications. The impacts of hurricanes on crop yield are estimated using econometric models and then the estimation results are incorporated into a stochastic agricultural sector model to evaluate their economic impact on the agricultural sector. Subsequently, the intensity and frequency of hurricanes are simulated to examine the implications of such shifts for the U.S. agricultural sector. Simultaneously, die types of reactions that would make the sector more resilient to hurricanes are examined.

Hurricanes and Crop Yields

In this study, we estimate the impact of hurricanes on crop yields using regressions that follow numerous other climate-related studies (Becker; Chen and Chang; Chen and McCarl; Chmielewski and Potts; Naylor et al. …

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