Kendon Bell

 

Dr Kendon Bell (Photo: Supplied)

Climate econometrics is an emerging field that combines statistical estimates of historical relationships between weather and economic and social outcomes with climate forecasts to make projections of future damages from climate change. Current models suggest that New Zealand has potentially large exposure to changing precipitation patterns, especially longer droughts and larger extreme rain events. Therefore, it is crucial to understand the true impact of these changes. However, current literature that use modern econometric techniques indicates that precipitation has a puzzlingly small impact on agriculture. Dr Kendon Bell of Manaaki Whenua Landcare Research believes that this counterintuitive result may be due to a lack of accurate precipitation measurements. He has been awarded a Rutherford Foundation Postdoctoral Fellowship to test this theory.

Dr Bell will investigate two areas of uncertainty: error in precipitation rates, and understanding how producers and consumers share the burden of climate change. To do this, Dr Bell will work with Patrick Walsh of Manaaki Whenua Landcare Research. They will employ two methods from econometrics – instrumental variables (IV) and the mean group estimator (MGE) – to investigate the measurement uncertainty. This programme will be the first application of these methods in the climate econometrics field, and the first to carefully investigate the empirical impact of precipitation on agricultural productivity.

Understanding the relative exposure of producers, retail consumers, and intermediaries to climate change is a key consideration for New Zealand. Dr Bell’s study will extend existing work to follow weather-induced milk price shocks through the different groups. These past price changes will allow better simulation of how climate change would impact New Zealand primary producers, processors, and final consumers, given the complex structure of the market.