Climate Change and Agriculture

Climate Change and Agriculture

An Economic Analysis of Global Impacts, Adaptation and Distributional Effects

New Horizons in Environmental Economics series

Robert Mendelsohn and Ariel Dinar

Despite its great importance, there are surprisingly few economic studies of the impact of climate on agriculture and how agriculture can adapt under a variety of conditions. This book examines 22 countries across four continents, including both developed and developing economies. It provides both a good analytical basis for additional work and solid results for policy debate concerning income distributional effects such as abatement, adaptation, and equity.

Chapter 8: Ricardian Models of Individual Farms

Robert Mendelsohn and Ariel Dinar

Subjects: development studies, agricultural economics, economics and finance, agricultural economics, environmental economics, environment, agricultural economics, climate change, environmental economics

Extract

In order to extend the Ricardian analyses to countries that do not have existing agricultural census data, it is necessary to collect information about farms across climate zones. Such surveys are most easily done at the individual farm level. The collected data provides more detailed information about farm activities and the resulting income from each activity. For example, individual surveys permit separate analyses of livestock, rainfed crops and irrigated crops. By definition, farm income or net revenue per hectare is gross revenue minus costs. The survey instrument needs to collect data about individual products sold and their prices in order to calculate farm-level gross revenue (the sum of revenue from all sources). Because the purpose of the Ricardian analysis is to measure the overall productivity of the land, gross revenue also includes the value of products consumed by the household. These products are valued at the market price. Because both livestock and crop products can be measured separately, it is possible to measure gross crop revenue and gross livestock revenue. Subtracting the costs of each activity yields crop net revenue and livestock net revenue. Irrigated plots lead to irrigated net crop revenue and rainfed plots lead to rainfed net revenue. In order to measure costs, the survey instrument collected data on the costs of farm production (see Dinar et al., 2008). For crops, this includes information on variable costs such as seeds and fertilizer as well as fixed costs such as machinery, equipment and animal power. For animals, this includes...

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