A Ricardian analysis of the climate change impact on Nepalese agriculture

This paper applies Ricardian approach to measure the effect of climate change on crop production in Nepal using cross-section data of Nepal Living Standard Survey 2003/04 and climate data from Department of Hydrology and Meteorology, Nepal. The study examines the relationship between net farm revenue and climate variables using 656 households of 14 districts covering all climatic zones of Nepal. Net farm revenue is regressed on climate and socio-economic variables. The findings show that these variables have significant impact on the net farm value per hectare. More specifically, relatively low precipitation and high temperature seem to have positive impact on net farm income during the fall and spring seasons. Net farm income is likely to be increased by summer precipitation, but not by temperature. Marginal impacts are mostly in line with the Ricardian model, showing marginally increasing precipitation during summer and winter would increase net farm income, but reduce by the quarter terms and temperature of these seasons. Moreover, marginally increasing precipitation would increase farm income in the hilly region, but reduce in Terai region. Other variables such as ratio of irrigated farm land and obtaining credit are found to be positive impact on net farm value but not by farm size. Conclusively, the impact of climate change on agriculture seems to be varied with the temperature and precipitation in different climatic zones.