Ozone stress and crop harvesting failure: Evidence from US food production

Abstract

Farmers react to ozone injury by abandoning crops when the expected revenues cannot compensate for the harvesting costs. This study provides the first empirical evidence of ozone pollution’s impact on the decision to abandon crops. Using a causal inference framework, we find evidence that a one-standard-deviation rise in ozone concentration decreases the harvested ratios of corn and soybeans by 0.133 and 0.151 standard deviations, respectively. Our bootstrap simulation results show that the agricultural production benefits from ozone control would be considerably underestimated for both corn and soybeans without accounting for the saved acreage that should have been abandoned. The re-estimated benefits of agricultural production from ozone control inform policy design regarding air pollution management and highlight the importance of research and development in ozone-tolerance traits. We also discuss the effects of insurance and price regimes on agricultural production by providing evidence that insurance enrollment rates and crop prices are imperative for adaptation to ozone stress, which facilitates insurance design to mitigate the adaptation disincentive.