Weather Differentials and Discount Rate Impact on Farmers’ Net Revenue: Modeling Results from Ghanaian Data Focusing on Different Agro-Climatic Zones

Abstract

In most developing countries, climate variabilities and discount rate played an integral role in the decision-making of farmers, which mostly affect their net revenue. Our study employs Ricardian models to empirically verify this hypothesis using data collected from three major agro-climatic zones in Ghana. We particularly estimated the comparative effect of climate change variability, discount rate, and soil fertility; due to trade-off effect of certain farm practices in response to climate change across major climatic zones and also the fact that discount rate becomes an extremely critical issue in formulating and evaluating conservation and management policy to address climate change. The result indicates that discount rate has a positive and significant effect on the farmers’ net revenue. Further, effect of changes in temperature on food crop production and hence net revenue is more felt in the forest and savannah zones. On the other hand, an increase in rainfall has significant negative effects on crop net revenues and whole-farm net revenue, but a positive effect on net revenue of farmers in the savannah zone. We also found a significant increase in soil fertility to increase crop net revenues.