Can fiscal expenditure for agriculture mitigate the impact of climate change on agricultural production?

The profound impact of climate change on agricultural production, and the government's fiscal expenditure for agriculture, is considered a crucial means to address this challenge. This study utilizes panel data from all prefecture-level cities in Heilongjiang Province from 2000 to 2020. Drawing upon the Cobb-Douglas production function, an economic climate model is constructed to empirically analyze the impact of climate change on grain yield in Heilongjiang Province. Furthermore, the role of fiscal expenditure for agriculture in mitigating the effects of climate change on grain yield is explored. Feasible Generalized Least Squares (FGLS) estimation is employed to address issues of "heteroscedasticity," "autocorrelation within groups," and "cross-sectional contemporaneous correlation" present in the model. The results indicate that climate change has a positive impact on rice and corn yields, while exhibiting a negative impact on wheat yield. The influence of climate change on crop yield is both linear and nonlinear. Specifically, temperature demonstrates a linear relationship with rice and corn yields, whereas precipitation shows a significant inverted U-shaped relationship with rice and corn yields. The impact of climate change on grain production in Heilongjiang Province varies significantly across regions. Fiscal expenditure for agriculture has a significant positive effect on the yield of major grain crops in Heilongjiang Province. In addressing the impact of climate change on grain production, agricultural fiscal expenditure enhances the positive effect of precipitation on rice and corn yields, while diminishing the positive impact of temperature on corn yield.