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Endogenous farm-type selection, endogenous irrigation, and spatial effects in Ricardian models of climate change

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  • Thomas Chatzopoulos
  • Christian Lippert

Abstract

In the estimation of Ricardian models the endogeneity of adaptation measures is typically ignored. In this article we propose a new estimation strategy that explicitly recognises the endogeneity of the farm type and irrigation to climate. Based on the latest census data on over 270,000 farms in Germany, we estimate a cross-sectional, spatial-IV model that decomposes the effects of climate on farm profitability into direct (unmediated) and indirect (mediated by the variables that reflect adaptation). Our results show that neglecting the endogenous nature of adaptation measures may substantially bias the magnitude of the total effect of climate on farm profitability.

Suggested Citation

  • Thomas Chatzopoulos & Christian Lippert, 2016. "Endogenous farm-type selection, endogenous irrigation, and spatial effects in Ricardian models of climate change," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(2), pages 217-235.
    • Handle: RePEc:oup:erevae:v:43:y:2016:i:2:p:217-235.
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    File URL: http://hdl.handle.net/10.1093/erae/jbv014
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    Cited by:

    1. Xun Su & Minpeng Chen, 2022. "Econometric Approaches That Consider Farmers’ Adaptation in Estimating the Impacts of Climate Change on Agriculture: A Review," Sustainability, MDPI, vol. 14(21), pages 1-23, October.
    2. Zeilinger, Julian & Niedermayr, Andreas & Quddoos, Abdul & Kantelhardt, Jochen, 2021. "Identifying the Extent of Farm-Level Climate Change Adaptation," 2021 Conference, August 17-31, 2021, Virtual 315233, International Association of Agricultural Economists.
    3. Santeramo, Fabio Gaetano & Bozzola, Martina & Lamonaca, Emilia, 2020. "Impacts of Climate Change on Global Agri-Food Trade," 2019: Recent Advances in Applied General Equilibrium Modeling: Relevance and Application to Agricultural Trade Analysis, December 8-10, 2019, Washington, DC 339375, International Agricultural Trade Research Consortium.
    4. Meyer, Kevin & Keiser, David A., 2016. "Adapting to Climate Change Through Tile Drainage: A Structural Ricardian Analysis," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235932, Agricultural and Applied Economics Association.
    5. Wei Yang & Jorie Knook, 2021. "Spatial evaluation of the impact of a climate change participatory extension programme on the uptake of soil management practices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(3), pages 539-565, July.
    6. Moretti, Michele & Vanschoenwinkel, Janka & Van Passel, Steven, 2021. "Accounting for externalities in cross-sectional economic models of climate change impacts," 95th Annual Conference, March 29-30, 2021, Warwick, UK (Hybrid) 311093, Agricultural Economics Society - AES.
    7. Tite Ehuitché Béké & Aïssata Sobia, 2020. "The Economic Impact of Climatic Variations on Ivorian Rice Farming," Journal of Agricultural Studies, Macrothink Institute, vol. 8(2), pages 88-109, June.
    8. Meyer, Kevin Michael, 2017. "Three essays on environmental and resource economics," ISU General Staff Papers 201701010800006585, Iowa State University, Department of Economics.
    9. Martina Bozzola & Emanuele Massetti & Robert Mendelsohn & Fabian Capitanio, 2018. "A Ricardian analysis of the impact of climate change on Italian agriculture," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 45(1), pages 57-79.
    10. Bruce A McCarl & Thomas W Hertel, 2018. "Climate Change as an Agricultural Economics Research Topic," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 40(1), pages 60-78.
    11. Janka Vanschoenwinkel & Steven Passel, 2018. "Climate response of rainfed versus irrigated farms: the bias of farm heterogeneity in irrigation," Climatic Change, Springer, vol. 147(1), pages 225-234, March.

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