IDEAS home Printed from
   My bibliography  Save this paper

Accounting for externalities in cross-sectional economic models of climate change impacts


  • Moretti, Michele
  • Vanschoenwinkel, Janka
  • Van Passel, Steven


Environmental effects and natural resources depletion associated with agriculture production affect the agriculture response to climate change. Traditional cross-sectional climate response models ignore this requirement. This research estimates the impact of climate on European agriculture using a continental scale Ricardian analysis. We correct farm income by accounting for resources (energy, fertilizers, pesticides and water) use intensity by calculating the sustainable value for a sample of 9,497 specialized field crop farms across Europe. The results show that a uniform increase in temperature (+1°C) across all four seasons lead to significant and negative effects on farmland values, net revenue and farms’ sustainable value, while additional precipitation (+1 cm) across the all seasons increases farms' land values and sustainable values, and harms farms’ net revenue. Compared with the traditional Ricardian method, the marginal effect of 1° C increase in temperature shift from positive to negative in Northern countries, while it leads to less damages in Southern countries when net revenue and farms’ sustainable values are used as dependent variables. We demonstrate that accounting for the environmental effects and depletion of natural capital by agriculture significantly improves the ability of the Ricardian method to estimate agriculture climate response functions in the long run.

Suggested Citation

  • Moretti, Michele & Vanschoenwinkel, Janka & Van Passel, Steven, 2020. "Accounting for externalities in cross-sectional economic models of climate change impacts," 94th Annual Conference, April 15-17, 2020, K U Leuven, Belgium (Cancelled) 303704, Agricultural Economics Society - AES.
  • Handle: RePEc:ags:aesc20:303704
    DOI: 10.22004/ag.econ.303704

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item

    More about this item


    Environmental Economics and Policy; Farm Management; Land Economics/Use;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aesc20:303704. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.