Conference Agenda

This paper estimates firm-level climate damages when adaptation is costly, gradual, and latent. We define a Red Queen gap, $g_{ct}=T^{obs}_{ct}-\tau_{ct}$, between realized local climate and the climate target embodied in production. The target is generated by a model in which firms learn about local climate from noisy weather histories and adjust production subject to reconfiguration costs. The framework distinguishes weather shocks, belief updating, target movement, and productivity-relevant mismatch. We estimate the model using county weather histories from 1961--2022 and 4,558,300 Chinese firm-year observations from 2007--2020. In the baseline maximum-temperature construction, firms update beliefs about the climate level, separate trend learning is weakly identified, and target adjustment is slow: the implied error-correction half-life is about 30.5 years. The estimated damage curvature implies a TFP loss of about 1.59% for a one-degree Red Queen gap. The generated gap has more productivity content than raw temperature, Kalman weather surprises, and a 30-year-normal gap in otherwise comparable fixed-effects specifications. Robustness checks and validation exercises using operating margins and heterogeneity patterns support the interpretation that the estimated state captures economically meaningful mismatch. The results show that adaptation can be active while still leaving firms persistently exposed to a moving climate.

This paper shows that regions with more secure land rights are associated with smaller heat damage to crop yields. After documenting this pattern across countries, we identify this relationship causally using the staggered land registry reform that enhanced land tenure security in Greece. Consistent with our theory, we find that the reform attenuates heat damage because it shifts farmers' adaptation strategies from enlarging croplands to increasing agricultural inputs (capital, labor, and irrigation). Overall, the reform is projected to offset at least two-thirds of Greece's agricultural productivity losses by 2100, underlining the crucial role of institutions in facilitating climate change adaptation.

This paper examines the role of crop prices in shaping farmers' adaptation to extreme heat and related damages to agricultural productivity. Using regional projections of international crop prices across Europe from 1990 to 2020, our econometric analysis shows that higher prices systematically exacerbate local heat damages on the yields of seven major crops. For instance, a 10\% price increase amplifies the negative effects of extreme heat exposure by 1%, 7%, and 8% for sugar beet, wheat, and maize yields, respectively. A simple theoretical framework – supported by empirical evidence – explains this counter-intuitive result: while higher crop prices encourage farmers to increase crop yields (via higher input use), they reduce the effectiveness of adaptation practices (as marginal input productivity reduces when input use increases). These combined effects imply that, contrary to predictions from simulation-based equilibrium models, global price adjustments to climate change may not offset heat-induced yield losses locally – and may even worsen them.

Understanding how households adapt to rising temperatures is central to evaluating the economic costs of climate change, yet evidence on adaptation in food consumption and expenditure remains limited. This paper studies behavioral adaptation in food-at-home spending to climate change by distinguishing short-run responses to weather fluctuations from long-run responses to persistent warming in the United States. Using household-level grocery transaction data matched with high-resolution temperature records, we decompose realized temperature into a slow-moving climate norm and a short-run weather deviation and estimate behavioral responses on both the extensive margin, the decision to shop, and the intensive margin, expenditure conditional on shopping. We find that food-at-home spending declines with higher temperatures in both short and long-run, but the long-run climate response is much larger. A 1℃ increase in weekly temperature above the norm lowers expected weekly spending by about 13 cents per capita, while a 1℃ increase in the climate norm lowers weekly spending by about 50 cents. This implies that behavioral adaptation intensifies, rather than attenuates, the short-run effect of heat. Responses vary across income groups, regions, and food categories, and differ between cold and heat exposure. These results highlight the importance of household consumption behavior for accurately measuring the economic impact of climate change and the role of behavioral adaptation in adjusting long-run welfare cost.