Measuring the impact of climate change on agriculture in Vietnam: A panel Ricardian analysis

Abstract

AbstractThis article investigates the economic impacts of changes in climatic conditions on Vietnamese agriculture. We apply the two‐step Hsiao method to a 10‐year panel of household data which focuses on the production of 20 crops across seven regions in Vietnam. This study allows for variable market feedbacks across regions that grow different selections of crops. In this way, our article differs from most panel Ricardian analyses which assume uniform market shocks on households. Our analysis also includes climate interactions to allow the effects of temperatures to be dependent on the levels of rainfall. Panel evidence from the Ricardian model suggests heterogeneous climate impacts across seasons and regions. Rising seasonal temperatures are associated with losses to most regions, with spring temperatures being the exception. Increases in summer precipitation are valuable to mitigate the negative effects of rising temperatures. Changes in climate normal should not be the focus of policymakers since the simulation indicates marginal losses to agricultural productivity, both in the short term and the long term. Regions with cool climates are likely to be most affected by the projected climate change.