Description
This paper presents an application of Ricardian approach to assess the impact of climate change on farmland values in Nepal. The Ricardian approach is estimated using a panel fixed effects model. The results are tested with two models that account for spatial effects: a spatial lag model and a spatial error model. The findings reveal that Nepalese farmlands are sensitive to climate change. This result is consistent in both the spatial and non-spatial analysis. The inclusion of the spatial effects, however, produced significantly more conservative estimates of climate change impacts. Average temperature in the spring and summer season and the average rainfall in the spring, autumn and winter season had an impact on farmland values. In addition, the existences of non-linear relationships between climate change and farmland values were found in certain seasons. The results from marginal impacts suggested the optimal temperature to be between 23.88°C and 29.36°C, where the land values increased by Rs.849 per hectare, for every degree increase in temperature. Similarly, for the rainfall, it was found that 1mm increase in average rainfall resulted in an increase in farmland values by Rs.1385 per hectare.
Assessing the impact of climate change on farmland values in Nepal: A Ricardian approach
This paper presents an application of Ricardian approach to assess the impact of climate change on farmland values in Nepal. The Ricardian approach is estimated using a panel fixed effects model. The results are tested with two models that account for spatial effects: a spatial lag model and a spatial error model. The findings reveal that Nepalese farmlands are sensitive to climate change. This result is consistent in both the spatial and non-spatial analysis. The inclusion of the spatial effects, however, produced significantly more conservative estimates of climate change impacts. Average temperature in the spring and summer season and the average rainfall in the spring, autumn and winter season had an impact on farmland values. In addition, the existences of non-linear relationships between climate change and farmland values were found in certain seasons. The results from marginal impacts suggested the optimal temperature to be between 23.88°C and 29.36°C, where the land values increased by Rs.849 per hectare, for every degree increase in temperature. Similarly, for the rainfall, it was found that 1mm increase in average rainfall resulted in an increase in farmland values by Rs.1385 per hectare.