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Compendium on methods and tools to evaluate impacts of, and vulnerability and adaptation to, climate change


Econometric (Ricardian-Based) Models
Description

Econometric models are manipulated with climate change scenarios to predict the economic costs of adaptation. They estimate structural relations between historical climate and agricultural land values under the presumption that such relations reflect a steady-state level of adaptation of regional farming systems to local climate characteristics. These relations are cross-sectional (i.e., units of observation are geographic areas) and the geographic variation in land values is assumed to be partly regulated by differences in the quality of climate inputs. Parameter estimates embed the relative efficiency of current adaptation to a range of climate conditions (cold and warm).

Appropriate Use Econometric models can capture the full range of economic adaptations that farmers and supporting institutions are likely to use in response to climate change. They are particularly suited to analysis that assumes no change in real crop prices in response to climate change. These tools do not estimate the cost of adaptation.
Scope All locations; agricultural sector; national or regional.
Key Output Potential changes in regional or national cropping patterns, land prices, production, revenues, and profits.
Key Input Historical climate and land values
Ease of Use Because no established or “canned” models exist, each application requires development of a unique, region-specific model.
Training Required Expertise in principles of econometric modeling
Training Available No formal training offered
Computer Requirements IBM-compatible PC
Documentation See Mendelsohn et al., 1994, in References.
Applications

Econometric models have been used to estimate the economic cost/benefit of climate change for agriculture and forestry in the United States, Brazil, and India.

Contacts for Framework, Documentation, Technical Assistance

Dr. Robert Mendelsohn

Yale University, 360 Prospect St., New Haven, CT 06511 USA; Tel: +1.203.432.5128; Fax: +1.203.387.0766; e-mail: robert.mendelsohn@yale.edu.

Cost Varies, depending on data needs and resources required for developing a unique model.
References

Dinar, A., R. Mendelsohn, R. Evenson, J. Parikh, A. Sanghi, K. Kumar, J. McKinsey, and S. Lonergon. 1998. Measuring the Impact of Climatic Change on Indian Agriculture. World Bank Technical Report No. 409, The World Bank, Washington, DC.

Mendelsohn, R. and J. Neumann (eds.). 1999. The Impacts of Climate Change on the U.S. Economy. Cambridge University Press, Cambridge, England.

Mendelsohn, R., W. Nordhaus, and D. Shaw. 1994. The impact of global warming on agriculture: A Ricardian analysis. American Economic Review 84(4):753-751.

Seo, S. and R. Mendelsohn. 2006. The impact of climate change on livestock management in Africa: a structural Ricardian analysis. CEEPA Discussion Paper No. 23, Centre for Environmental Economics and Policy in Africa, University of Pretoria.


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