An Economic Analysis of Global Impacts, Adaptation and Distributional Effects
New Horizons in Environmental Economics series
Chapter 3: Literature Review of Economic Impacts of Climate Change on Agriculture
1 In the previous chapter we reviewed the scientific literature that links climate to both crop and livestock productivity. This chapter reviews the literature that measures the economic impact of climate change on agriculture. Many studies of economic impacts of climate change are concerned that changes in climate will have harmful effects on the agricultural sector (for example Smith and Tirpak, 1989; Nordhaus, 1991; Cline, 1992; Rosenzweig and Parry, 1994; Pearce et al., 1996; Tol, 2002; Mendelsohn and Williams, 2004; Parry et al., 2004). Some of these studies predict there will be adverse agricultural impacts in all countries, whereas others expect the harmful impacts to be concentrated in developing countries. Developing countries may be more vulnerable to climate change because these regions are already very hot and the agricultural systems may be less capable of adapting. We distinguish amongst six main types of approaches: (1) studies that rely on crop simulation models; (2) studies that rely on cross-sectional or intertemporal analyses of yields; (3) agro-economic simulation models of farms; (4) studies based on panel (intertemporal) analysis of net revenues across weather; (5) studies based on cross-sectional analyses of net revenues or land values per hectare; and (6) studies that use CGE (computable general equilibrium) models. In the following sections, we discuss each of these approaches in detail and highlight their strengths and weaknesses. CROP SIMULATION MODELS The first and one of the most popular methods for estimating the impacts of climate change on agriculture relies on crop simulation models. Crop...
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