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Adaptation to Drought Conditions and Farm Performance
註釋We estimate the effect of drought duration on farm performance, examine farmers' historical adaptation to drought conditions, and determine the maximum drought duration beyond which farmers' adaptation to drought condition would start to diminish assuming existing adaptation patterns persist. We adopt a novel panel regression method called the “mean observation OLS” (MO-OLS) that allows for multidimensional slope heterogeneity, and thus captures the presence of adaptation in the model estimation. We apply the MO-OLS method to a dataset from south-central Sweden, spanning the period 2001-2018. The results suggest that a one day increase in drought duration leads to a reduction in agricultural net value added by approximately 5%, with systematic variation in the effects across the municipalities in south-central Sweden. The findings also indicate a very low adaptation to drought conditions from 2001 to 2015, followed by a modest adaptation from 2016 to 2018. The results further highlight that farmers' adaptation to drought conditions would be less effective at mitigating economic loss under a scenario where drought duration exceeds 26 days.