Empirical Studies

This section contains summaries of the empirical studies included in the present thesis.

In particular, in the following sub-sections the main results and basic conclusions of each study are presented.

1.3.1 Study I: Climate Change and Risk in Chinese Inland Aquaculture

Despite the fact that more than 60% of global aquaculture output is produced in China, the impact of climate change on Chinese aquaculture has not been well studied. Using an adaption of the Just and Pope (1978, 1979) method and a newly constructed data set comprising province-level aquaculture production data and climate information from 1993 until 2009, it is the purpose of this study to analyze the marginal contributions of regular input factors and climate factors to both mean yield and yield risk in Chinese inland aquaculture. The main findings include the following:

(1) The inland aquaculture sector as a whole would benefit from marginal increases in both annual average temperature and total annual precipitation in terms of an increasing mean yield. The specific relationship between the annual average temperature and the yield level, however, is found to be non-linear, so that the positive marginal effects of temperature increases will gradually diminish.

(2) Increases in annual average temperature reduce yield risk at the margin.

(3) A 1°C increase in annual average temperature would, ceteris paribus, increase the average yield in the Chinese inland aquaculture sector by 6.8%. Given the total area under aquaculture, this would, on the national level, generate additional output with a value of around USD 2.97 billion. A 100 mm increase in total annual precipitation in turn would improve the average aquaculture yield by 1.2%. The market value of the consequent increase in national output would be USD 0.52 billion.

(4) An intensification of production would help to increase mean yields.

(5) Adjustments in the use of regular input factors can be used to limit yield risk.

In summary, it can be stated that the projected changes in climate, at least in the short run, are not opposing further improvements in yield and overall output. To the contrary, marginal increases in both annual average temperature and total annual precipitation would even benefit the inland aquaculture sector. Moreover, it emerges that, after climate influences are accounted for, an intensification of production by employing more labor or using more fry would be suitable strategies to achieve further yield improvements without causing an increasing level of yield risk.

1.3.2 Study II: Climate Change, Risk and Grain Yields in China

Adopting yield functions based on the aforementioned adaption of the Just and Pope (1978, 1979) methodology, this study is intended to analyze the marginal impacts of regional climate change and of the use of regular input factors on mean yields and yield risks in the Chinese grain sector. For this purpose, a province-level panel data set on grain production and climate between 1985 and 2009 has been constructed. The results indicate that changes in climate will affect grain production in North and South China differently. Specifically, it emerges that

(1) Increasing annual average temperatures would at the margin lead to reductions in mean yields both in North and in South China, but North China would be more strongly affected.

(2) Higher levels of total annual precipitation would lead to higher mean yields in North China, but to slightly lower mean yields in South China.

(3) Both increasing annual average temperatures and increasing levels of total annual precipitation would have a negative marginal effect on the level of yield risk in South China.

(4) A 1°C increase in annual average temperature would reduce national grain output by 1.45% (1.74% reduction in North China and 1.19% reduction in South China), while an increase in total annual precipitation of around 100mm would increase national grain output by 1.31% (3.0% increase in North China and 0.59% reduction in South China).

(5) Increases in the use of fertilizer and irrigation would, in both North and South China, lead to yield improvements.

To sum up, the projected increases in temperatures and precipitation levels would have both positive and negative effects on China. Hence, the overall impact of climate change will depend strongly on the exact developments of temperature and precipitation over time. However, particularly due to the negative effects of increasing annual average temperatures on mean yields in both North and South China, a negative net effect is possible. After climate influences are accounted for, increases in the application of fertilizer and use of irrigation emerge as possible options to further increase mean yields and hence output in Chinese grain farming, though the associated risk effects should not be neglected.

1.3.3 Study III: Total Factor Productivity and Technical Efficiency in Chinese Inland Aquaculture

The Chinese inland aquaculture sector has grown substantially over the past decades.

While it is clear that part of the massive growth in output is due to increases in the use of regular input factors, the development of total factor productivity (TFP) and its components, especially of technology and technical efficiency, has so far received little attention. Stochastic frontier analysis (SFA) is employed in the present study to estimate TFP change and its components. It moreover allows analyzing the development, geographical distribution and determinants of technical efficiency. Regarding the determinants of technical efficiency it is of particular interest in the present study whether the capacity of the extension system or climate variables affect the level of technical efficiency. For these analyses a province-level panel data set on Chinese

inland aquaculture production between 1993 and 2009 is employed. The main results include:

(1) Technical efficiency in Chinese inland aquaculture has decreased notably between 1993 and 2009, while at the same time technical change has followed a strong positive trend. Overall, after additionally accounting for scale effects, TFP has nearly doubled over this period.

(2) After input growth has been the dominant driver of output growth in the beginning of the observation period, TFP change and changes in input use have in later years made contributions of similar magnitude, though the relative importance of the two factors varies from year to year.

(3) Technical efficiency is highest in Southeast China and decreases strongly towards the north and the west of the country.

(4) An increasing number of aquaculture technical extension staff per unit of labor in aquaculture production would have a positive marginal effect on technical efficiency, whereas increasing annual average temperatures would have a negative effect at the margin.

In summary, technical change has been the driver behind the substantial TFP growth between 1993 and 2009 and has thus become an increasingly important source of output growth. The decreasing degree to which aquaculture producers are able to make use of the potential of the available production technology, as evidenced by the negative trend in technical efficiency, and an observed slowdown in technical change, however, require policy attention. Among the reasons for the decrease in technical efficiency, a declining capacity of the extension system to offer services to aquaculture producers emerges as a particularly important issue. The wide range of the estimated technical efficiency scores of the different provinces reveals that Chinese inland aquaculture faces region-specific challenges, which might be aggravated by the negative effects of a climate change-induced warming on technical efficiency.