The Impact of Climate on Agriculture: A Ricardian Approach

Because of the potential for global warming, there are widespread concerns about the impact of changing climate upon the productivity of land in farming and other sectors. This paper develops a new approach for measuring the economic impact of environmental factors such as climate on production by examining the direct impact of the environmental factor on land productivity as measured by land prices. This new method is applied to examine the effect of climate on agriculture using cross-sectional farm data for almost 3000 counties in the United States. It finds substantial impacts of climatic variation on both land values and farm revenues. Among the central findings are that higher temperatures in all seasons except autumn reduce all seasons except autumn increases farm values. The relationships are, however, nonlinear and complex.