The Critical Role of Conversion Cost and Comparative Advantage in Modeling Agricultural Land Use Change

Electronic version of an article published as [Climate Change Economics, Volume 11, Number 1, 2020, 44 pages] [https://doi.org/10.1142/S2010007820500049] © [copyright World Scientific Publishing Company] [https://www.worldscientific.com/doi/10.1142/S2010007820500049]

Posted: 5 Sep 2020

See all articles by Xin Zhao

Xin Zhao

University of Maryland - Joint Global Change Research Institute

Katherine Calvin

Joint Global Change Research Institute

Marshall Wise

Government of the United States of America - Pacific Northwest National Laboratory

Date Written: February 19, 2020

Abstract

The difference in land use modeling approaches is an important uncertain factor in evaluating future climate scenarios in global economic models. We compare five widely used land use modeling approaches: constrained optimization, constant elasticity of transformation (CET), the additive form of constant elasticity of transformation (ACET), logit, and Ricardian. We demonstrate that the approaches differ not only by the extent of parameter uses but also by the definition of conversion cost and the consideration of comparative advantage implied by land heterogeneity. We develop a generalized hybrid approach that incorporates ACET/logit and Ricardian to account for both conversion cost and comparative advantage. We use this hybrid approach to estimate future climate impacts on agriculture. We find a welfare loss of about 0.38–0.46% of the global GDP. We demonstrate that ignoring land heterogeneity or land conversion costs underestimates climate impacts on agricultural production and welfare.

Keywords: Land use modeling, land heterogeneity, conversion cost, Ricardian model, climate impact, welfare

JEL Classification: Q54, Q15

Suggested Citation

Zhao, Xin and Calvin, Katherine and Wise, Marshall, The Critical Role of Conversion Cost and Comparative Advantage in Modeling Agricultural Land Use Change (February 19, 2020). Electronic version of an article published as [Climate Change Economics, Volume 11, Number 1, 2020, 44 pages] [https://doi.org/10.1142/S2010007820500049] © [copyright World Scientific Publishing Company] [https://www.worldscientific.com/doi/10.1142/S2010007820500049] , Available at SSRN: https://ssrn.com/abstract=3662051

Xin Zhao (Contact Author)

University of Maryland - Joint Global Change Research Institute ( email )

5825 University Research Court, Suite 3500
College Park, MD 20740
United States

Katherine Calvin

Joint Global Change Research Institute ( email )

5825 University Research Court, Suite 3500
College Park, MD 20740
United States

Marshall Wise

Government of the United States of America - Pacific Northwest National Laboratory ( email )

901 D Street
370 L'Enfant Promenade, S.W.
Washington, DC 20024-2115
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
268
PlumX Metrics