PI: Teng "Ted" Liu

Date Awarded: July 2021 (FSRF 2021-1-003)

Abstract (from final report):

The agricultural sector is particularly susceptible to the impact of climate change. In this paper, I investigate how vulnerability to climate change affects U.S. farms’ credit access, and demonstrates that such impact is unequally distributed across farms. I find that higher exposure to climate change, measured by temperature anomaly, reduces bank lending to farms. Such impact is persistent, nonlinear, and heterogeneous. Small and medium farms almost always experience loss of loan access. In comparison, large farms see less severe credit contraction, and in some cases may even see improvement in funding. While small banks carry the burden of continuing to lend to small farms, their limited market share cannot compensate for the reduction of lending from medium and large banks. These results suggest that factors such as farm size and bank type can amplify the financial impact of climate change.

Further Information: Full report can be downloaded here.