There is evidence of an increasing global temperature, between 1951-2012 the global mean surface temperature increased with 0.72°C. In the Scandinavian areas the warming is shown to have been greatest. An indication has been established that more specialized farms are less viable than diversified. Thus, there may exists a negative relationship between specialization and the economic performance farms. Diversification has been promoted by the rural development program as a strategy to reach goals such as to increase rural economic growth and reducing farm household income risk. The objective of this thesis is to scrutinize if Swedish dairy farms that diversify into unconventional income opportunities can cushion a possible negative effect from increase in the mean temperature. The method used to analyze is a Stochastic Frontier Analysis, the model includes temperature variables, index for income diversification and an interaction term between them. The results show that there are both negative and positive effects from increased mean temperature and an indication of a positive effect from income diversification on output. Further the interaction term displays a positive sign for spring and summer temperature which have a negative effect on output by themselves.
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