Conference Agenda

Identifying the economic impacts of climate change requires assuming that producers pursue optimal resource allocation, conditional on their beliefs about local climate. This basic assumption places certain requirements on research design and data that are particularly challenging to fulfill for regions exposed to a large diversity of climates. We propose an empirical strategy that addresses this aspect by mapping latent climates considering multiple climate dimensions that shape sample units’ production possibility sets. By establishing plausible correspondence between regional climate conditions and production technology sets, this procedure ensures the validity of the Envelope Theorem, thus enabling consistent inferences about marginal climate effects. We implement this approach using a fixed-effects model that accounts for differences in within-variation patterns between groups of study regions exposed to different climates. The model is estimated with agricultural and weather data for 77 regions in Kazakhstan, Russia, and Ukraine over 2000–2020. Our results reveal substantial heterogeneity in climate impacts. Recent temperature trends reduced land productivity in three of six regions in Kazakhstan and in eight of 49 regions in Russia, while a handful of regions in Ukraine and Russia, along with one in Kazakhstan, should have benefited from higher temperatures. Our predictions for a 1°C increase in growing-season average temperatures indicate that, given the current extent of adaptation, land productivity can diminish in four regions in Kazakhstan (−5.8% to −18.4%), 13 in Russia (−4.8% to −11.2%), and two in Ukraine (−5.0% to −5.3%), whereas only three regions are predicted to benefit. These findings highlight the uneven distribution of climate impacts across the Eurasian grain belt and underscore the importance of region-specific adaptation strategies. While developed for KRU, our latent-climate framework is broadly applicable and may help assess climate impacts in other major agricultural regions characterized by considerable climatic diversity.