Assessing the Impact of Climate Change on Farmland Values in Nepal: A Ricardian Approach

Samrat Kunwar

Abstract


This paper presents an application of the Ricardian approach to evaluate the impact of climate change on farmland values in Nepal. The Ricardian approach is estimated using a panel fixed effects model and the outcome is compared against two separate models that incorporate the spatial nature of the data: a spatial lag and a spatial error model. The findings suggest that Nepalese farmlands are sensitive to climate change, and this result was consistent in both the spatial and the non-spatial framework. 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 average rainfall in the spring, autumn and winter season were found to have an impact on farmland values. In addition, the existence of non-linear relationships between climate change and farmland values were found in certain seasons. The results from the marginal impacts suggested the optimal temperature for farmlands to be between 23.880C and 29.360C, and the overall impact of temperature on land value was Rs. 9,075/hectare. Similarly, for rainfall, it was found that 1mm increase in average rainfall resulted in a rise in farmland value by Rs. 2,289/hectare

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