Abstract
This study uses the Ricardian (hedonic) approach to estimate the impact of potential climate change on agricultural farmland values in the Southeast U.S. as a distinct agricultural region. Using the Agricultural Resource Management Survey and seasonal county-level climate and data, we find that regional farmland values increase with spring and fall temperatures and fall precipitation and decrease with winter and summer temperatures. Long-term climate change projections predict aggregate farmland value losses of 2.5–5% with differential state-level impacts, ranging from large losses in Florida to significant gains in Virginia. The results are consistent with recent research and can be helpful in policy design and forecasting land use change.
Highlights
Weather and climate have a strong impact on agricultural production
∑ ∑ ∑ ∑ lnVc = α + βT,mTc,m + γT,mTT2,m + βR,m Rc,m + γR,m R2R,m + ηSc + θGc + θHc + ST + εic m m m m where Vc represents farmland value in county c, Tc,m (Rc,m) represent average temperature in county c during season m, G is a vector of geographic variables, H is a vector of farm socioeconomic and demographic variables, S is a vector of soil variables including irrigation and ST represents a State dummy
The results show that farmland values decrease with average winter and summer temperatures and increase with spring and fall temperatures, which confirms recent findings of the experimental agronomic research on the region
Summary
Weather and climate have a strong impact on agricultural production. The impacts vary by production type (livestock vs. crop) and by crop. This study follows up on these aspects and uses a similar approach in the analysis of farm level data in the Southeast U.S. One of the main criticisms of the original Ricardian model by Mendelsohn et al (1994) [20] is that, instead of implicitly assuming infinite adjustment costs in agronomic studies, the model assumes zero adjustment costs yielding a lower-bound estimate of the climate change costs [29]. Similar to the hedonic model, Deschenes and Greenstone (2007) [25] used farm profits instead of land values and justify their approach by better accommodation of farmer adaptation and of the omitted variable bias associated with the production function and the hedonic approaches respectively (similar because the hedonic model itself is derived from a farm profit function) Their estimation of the impacts of temperature and precipitation on agricultural profits exploited inter-annual and cross-sectional, variation of the weather variables. Other studies of the issues of adaptation include Cammarano et al (2012) [38], Royce et al (2012) [39] and Cabrera et al (2009) [40]
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