The impact of climate change on agricultural economic resilience: Moderating effect of fiscal support for agriculture

Climate change has become one of the greatest threats to the modern human society and economic development in the world, especially to the agricultural sectors in developing countries. In the context of addressing climate change, it is of great significance for China to effectively exert the effectiveness of fiscal support for agriculture and enhance the of the agricultural economy resilience to realize the high-quality development of agriculture in China. As a commonly used policy instrument, fiscal support for agriculture has been regarded as an effective way to achieve these the goals. However, there is very limited research on quantifying the relationship between climate change and agricultural economic resilience, or revealing the potential role of fiscal support for agriculture among them. Therefore, based on a cross-country and county-level panel dataset from 2004 to 2020, which contains 1326 counties from 30 provinces (including autonomous regions and municipalities, Xizang, Hongkong, Macao and Taiwan are not included because of data availability issues) in China, this study firstly applies a fixed-effect econometric model to empirically analyze the impact of climate change on agricultural economic resilience, and then uses a moderating effect model to test the moderating effects of fiscal support for agriculture therein. Heterogeneities of both functional region for grain production and income level of rural residents are also taken into consideration. The benchmark regression result indicates that the climate change, which is mainly characterized by temperature rising or warming, has negative impacts on agricultural economic resilience. These results remain valid after a set of robustness tests. The moderating effects of fiscal support for agriculture have been tested significant and proved to be existed in the studying period, which means that fiscal support for agriculture in China could be an effective measure to mitigate the negative impacts on agricultural economic resilience from climate change. From the perspectives of both functional region for grain production and income level of rural residents, heterogeneity analysis shows that the negative impacts of climate change on agricultural economic resilience are more pronounced in the main grain-consuming regions and low-income regions than in other functional or income level regions in China. The regulatory role of fiscal support for agriculture is also significantly heterogeneous. Fiscal support for agriculture exerts a more significant moderating effect in the regions of main grain-producing and low-income in the study period, meaning that fiscal support for agriculture plays a more effective role in mitigating the negative impacts from climate change in these regions than in others. According to the research results, this study recommends that it is necessary to continually optimize the climate policy schemes and implement effective policy instruments on agricultural sector to enhance the agricultural economic resilience, as well as to put more effort on climate adaptative measures by strengthening the fiscal support for agriculture. Additionally, regionally differentiated agricultural economic resilience enhancement programs should be considered in designing to mitigate the negative impacts of climate change on China's agricultural economic resilience, and to better serve for the high-quality development of agriculture in China.