How Do Rural People and Rural Places Adapt to Changing Climate Conditions?

The Dust Bowl drought shock took place in the 1930s. Rick Hornbeck wrote a great paper studying how the place and the people adapted to the shock.

Hornbeck, Richard. "The enduring impact of the American Dust Bowl: Short-and long-run adjustments to environmental catastrophe." American Economic Review 102, no. 4 (2012): 1477-1507.

Hornbeck, Richard. "Dust bowl migrants: Environmental refugees and economic adaptation." The Journal of Economic History 83, no. 3 (2023): 645-675.

I interpret Rick’s findings as saying that those who left the Dust Bowl (Oklahoma area) because of the origin drought shock and moved to some city (perhaps Chicago) had lower educational levels than those who moved to Chicago from non-shocked origin areas BUT that by 1939 their incomes were roughly the same as the other migrants. THIS means that Dust Bowl migrants adapted to the origin shock.

I am telling you this economic history lesson as a preamble to market my new NBER paper with Robert Huang of Stanford.

In environmental economics today, there is an exciting debate about the pace of adaptation to climate change. I am on record as being tremendously optimistic about our ability to adapt. When we fail to adapt, it is almost always because government policy has slowed the adaptation process. Read my natural disaster book for several examples. Skilled empiricists continue to write papers documenting evidence of slow adaptation. Here is a leading example.

In this influential study, the authors create a long run county level data set as they study farm yields of soy, wheat and corn across decades. They merge in county level data on temperature and rainfall. They implicitly embrace a representative agent framework.

In our new paper, we update their results through the year 2020 and we relax the assumption that all farm workers have the same ability, that all farmland is of the same quality within a county and that all farm managers have the same ability. By introducing heterogeneity, we study comparative advantage and sorting at the extensive margin.

We apply Jim Heckman’s ideas regarding selection to the climate change impact literature. Consider a simple story. The opportunity cost of farming is that rural people can move to the city. If a county faces more drought and heat because of climate change then workers are more likely to move to the City. If workers differ in quality, then the best workers are more likely to move to the city . So if workers are bundles of brains and muscle and if brain skill pays more in Cities then if labor demand for rural workers declines in weather shocked counties, the “brainy” will be more likely to move to the City. The researcher who ignores this “Brain Drain” in the rural area will find that the PLACE IS NOT adapting because farm yields will be low but the irony is that this result is partially caused by person based adaptation. The composition of rural people shifts as a function of optimizing behavior. The reduced form agricultural literature ignores this point.

We also document that climate change shifts land holdings in rural counties. Small farmers sell their land to larger farmers as the heat ramps up. This effect implies that climate change could RAISE place based productivity because the superstar managers control more land. Our paper is subtle about documenting the adjustment margins and their net impact.

We also document that agriculture’s overall productivity is rising over time so any climate change induced reduction in output does not sharply reduce the overall abundance of food production. This point directly relates to our new optimism paper.

At the end of my paper with Robert, we argue that we do not know what the pace of person-based and place-based rural adaptation would be if Federal farm subsidies were smaller. These subsidies create a moral hazard effect as the safety net discourages re-optimization. Public insurance crowds out private self-protection! This theme merits much more discussion and policy debate.