8.27.2013

The value of forecasting

Mark Rosenzweig and Chris Udry have a pretty nice new working paper on the value of weather forecasts in India:
Forecasting Profitability
We use newly-available Indian panel data to estimate how the returns to planting-stage investments vary by rainfall realizations. We show that the forecasts significantly affect farmer investment decisions and that these responses account for a substantial fraction of the inter-annual variability in planting-stage investments, that the skill of the forecasts varies across areas of India, and that farmers respond more strongly to the forecast where there is more forecast skill and not at all when there is no skill. We show, using an IV strategy in which the Indian government forecast of monsoon rainfall serves as the main instrument, that the return to agricultural investment depends substantially on the conditions under which it is estimated. Using the full rainfall distribution and our profit function estimates, we find that Indian farmers on average under-invest, by a factor of three, when we compare actual levels of investments to the optimal investment level that maximizes expected profits. Farmers who use skilled forecasts have increased average profit levels but also have more variable profits compared with farmers without access to forecasts. Even modest improvements in forecast skill would substantially increase average profits.
An ungated copy can be found here

8.02.2013

Please read our paper on climate and human conflict carefully

Edward Miguel, Marshall Burke and I have a new paper quantifying the link between climate and conflict.

There has already been a lot of public criticism of this paper. Marshall has written detailed replies to many of these comments, explaining the why many of these comments are misguided or simply inaccurate.  His reply is on G-FEED here.

I recommend that researchers and journalists read these replies before they further promote inaccurate statements to the public.