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

46 Pages Posted: 23 Nov 2013

See all articles by Carlo Fezzi

Carlo Fezzi

University of East Anglia (UEA) - School of Environmental Sciences

Ian J. Bateman

University of East Anglia (UEA) - School of Economic and Social Studies

Date Written: November 21, 2013

Abstract

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

Keywords: Climate Change, Agriculture, Ricardian Analysis, Aggregation Bias, Semi-Parametric Models

JEL Classification: Q54, C23, C14

Suggested Citation

Fezzi, Carlo and Bateman, Ian Julian, The Impact of Climate Change on Agriculture: Nonlinear Effects and Aggregation Bias in Ricardian Models of Farm Land Values (November 21, 2013). FEEM Working Paper No. 94.2013. Available at SSRN: https://ssrn.com/abstract=2358004 or http://dx.doi.org/10.2139/ssrn.2358004

Carlo Fezzi (Contact Author)

University of East Anglia (UEA) - School of Environmental Sciences ( email )

Norwich, Norfolk
United Kingdom

Ian Julian Bateman

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

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