Quality Matters More Than Quantity: Asymmetric Temperature Effects on Crop Yield and Quality Grade

Climate change affects agriculture by altering not only output quantity, but also crop quality. We quantify the economic impacts of climate change on agriculture through changes in both quantity and quality, where quality is measured by crop grades. Our model controls for methodological issues regarding sample selection, aggregation, phenology, and nonlinearity. The empirical application to Japanese rice production indicates that temperature effects are asymmetric: quantity is especially vulnerable to cold, whereas quality is vulnerable to extremely high temperature. Using these results, we simulate the effect of global warming, and we find that warming (a 3 °C increase) increases farm revenues by improving yield but decreases revenues as a result of deteriorating quality. The net effect is negative, suggesting that quality matters more than quantity. The negative effect, however, can be mitigated by shifting cultivation periods and/or regions. Overall, our results suggest that the estimated impacts of climate change and adaptation strategies could be severely misleading unless quality is considered.