Micro-econometric analysis of climate change effects on the German agriculture: Ricardian analysis and extensions

• Does agricultural productivity differ due to climate?

• If yes, how to provide a credible monetary estimate for the value of climate?

• Will potential climate change be beneficial or harmful for the farm sector as a whole?

• How do farmers adapt to climate change?

Aiming at an economic analysis of the impacts of climate change on the German agriculture by means of the cross-sectional version of the Ricardian approach, our project attempts to answer these questions. In essence, we examine the association of agricultural productivity and land use patterns with climatic attributes. In doing so, both traditional as well as structural Ricardian models are employed and extended. We take explicit spatial econometric as well as limited dependent variable perspectives that allow for the consideration of potential interactions in land use decision making, and the investigation of a spectrum of discrete adaptation responses. Empirical applications draw on official farm census as well as observed and processed climate and other data, and are pursued by means of ecological regressions at various spatial scales. Subprojects focus on various methodological and analytical refinements in an attempt to improve the method’s descriptive and simulative fidelity, and hence render it more realistic for policy design. Since a major shortcoming of a Ricardian analysis pertains to the disregard of adjustment costs, the corresponding (transaction) costs will be discussed and theoretically analyzed. Finally, based on the results of the micro-economic analysis, regions which would have to adapt will be presumably identified.