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The Impact of Climate Change on Agriculture: Nonlinear Effects and Aggregation Bias in Ricardian Models of Farmland Values

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  • Carlo Fezzi
  • Ian Bateman

Abstract

Ricardian (hedonic) analyses of the impact of climate change on farmland values typically assume additively separable effects of temperature and precipitation with model estimation being implemented on data aggregated across counties or large regions. We use a large panel of farm-level data to investigate the potential bias induced by such approaches. Consistent with the literature on plant physiology, we observe significant nonlinear interaction effects, with more abundant precipitation acting as a mitigating factor for increased heat stress. This interaction disappears when the same data are aggregated in the conventional manner, leading to predictions of climate change impacts that are significantly distorted.

Suggested Citation

  • Carlo Fezzi & Ian Bateman, 2015. "The Impact of Climate Change on Agriculture: Nonlinear Effects and Aggregation Bias in Ricardian Models of Farmland Values," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(1), pages 57-92.
  • Handle: RePEc:ucp:jaerec:doi:10.1086/680257
    DOI: 10.1086/680257
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    Cited by:

    1. Mu, Jianhong E. & Mihiar, Christopher & Lewis, David J. & Sleeter, Benjamin & Abatzoglou, John T., 2016. "An Empirical Analysis of Climate Uncertainty and Land-use Transitions in the U.S. Pacific and Mountain Regions," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236643, Agricultural and Applied Economics Association.
    2. Mérel, Pierre & Gammans, Matthew, 2018. "Climate econometrics: Can the panel approach account for long-run adaptation?," 2018 Annual Meeting, August 5-7, Washington, D.C. 274399, Agricultural and Applied Economics Association.
    3. repec:nbr:nberch:13941 is not listed on IDEAS
    4. Steven Passel & Emanuele Massetti & Robert Mendelsohn, 2017. "A Ricardian Analysis of the Impact of Climate Change on European Agriculture," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 725-760, August.
    5. repec:oup:erevae:v:45:y:2018:i:1:p:57-79. is not listed on IDEAS
    6. repec:oup:renvpo:v:11:y:2017:i:2:p:299-318. is not listed on IDEAS
    7. repec:wsi:ccexxx:v:09:y:2018:i:03:n:s2010007818500082 is not listed on IDEAS
    8. Prince Etwire & David Fielding & Victoria Kahui, 2017. "The impact of climate change on crop production in Ghana: A Structural Ricardian analysis," Working Papers 1706, University of Otago, Department of Economics, revised Apr 2017.
    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, Foundation for the European Review of Agricultural Economics, vol. 45(1), pages 57-79.
    10. Basurto-Hernandez, S. & Maddison, D. & Banerjee, A., 2018. "The effects of climate change on crop and livestock choices," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277517, International Association of Agricultural Economists.
    11. Ji, Xinde & Cobourn, Kelly M., 2018. "Weather Fluctuation, Expectation Formation, and the Short-run Behavioral Responses to Climate Change," 2018 Annual Meeting, August 5-7, Washington, D.C. 274473, Agricultural and Applied Economics Association.
    12. repec:spr:climat:v:144:y:2017:i:2:d:10.1007_s10584-017-2033-x is not listed on IDEAS
    13. Zhang, Hongliang & Antle, John, 2016. "Assessing Climate Vulnerability of Agricultural Systems Using High-order moments: A Case Study in the U.S. Pacific Northwest," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236233, Agricultural and Applied Economics Association.
    14. repec:bla:jageco:v:70:y:2019:i:2:p:488-506 is not listed on IDEAS
    15. Basurto, Saul, 2016. "A Mexican Ricardian analysis: land rental prices or net revenues?," 90th Annual Conference, April 4-6, 2016, Warwick University, Coventry, UK 236362, Agricultural Economics Society.
    16. repec:eee:ecolec:v:147:y:2018:i:c:p:134-154 is not listed on IDEAS
    17. Guilherme DePaula, 2018. "The Distributional Impact of Climate Change in Brazilian Agriculture: A Ricardian Quantile Analysis with Census Data," Center for Agricultural and Rural Development (CARD) Publications 18-wp583, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    18. Emanuele Massetti & Steven Van Passel & Camila Apablaza, 2018. "Is Western European Agriculture Resilient to High Temperatures?," CESifo Working Paper Series 7286, CESifo Group Munich.
    19. Lucas Bretschger & Karen Pittel, 2019. "Twenty Key Questions in Environmental and Resource Economics," CER-ETH Economics working paper series 19/328, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    20. Ji, Xinde & Cobourn, Kelly M. & Weng, Weizhe, 2018. "The Effect of Climate Change on Irrigated Agriculture: Water-Temperature Interactions and Adaptation in the Western U.S," 2018 Annual Meeting, August 5-7, Washington, D.C. 274306, Agricultural and Applied Economics Association.
    21. Hongliang Zhang & John M. Antle, 2018. "Weather, Climate and Production Risk," IRENE Working Papers 18-01, IRENE Institute of Economic Research.

    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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