Climate change effects and economic impact on agricultural production in Sicily

Abstract

The nature of climate change and its possible economic consequences are complex issues. This complexity results from the interaction of a large number of elements from natural and economic science. The economic impact of climate change has been extensively investigated in the contemporary literature, particularly using so-called Integrated Assessment Models. However, the sensitivity of this class of models to the chosen impulse function has switched research focus to empirical investigation of the influence of climate change on socioeconomic factors. On the other hand, while the majority of the literature focuses on economic outcomes such as productivity, the effects of climate change on financial markets, particularly on a regional scale, remain understudied. The purpose of the present work is to examine the impact of temperature and rainfall on agricultural productivity through an empirical analysis of market price time series for lemons in Sicily. On this purpose, a dataset consisting of 254 monthly observations relative to the Messina’s market from January 2002 to February 2023 and a price series provided by Istituto di Servizi per il Mercato Agricolo Alimentare is taken into account. From the present study, it emerges that, while the average monthly temperature has little effect, it is a key determinant in lowering return variance (and hence the volatility).