The Role of Nonfarm Influences in Ricardian Estimates of Climate Change Impacts on U.S. Agriculture

<p>PI-provided Abstract: The Ricardian approach is a popular hedonic method for analyzing climate change impacts on agriculture. The approach typically relies on a cross-sectional regression of farmland asset prices on fixed climate variables, making it particularly vulnerable to omitted variables. I conduct a long-spanning Ricardian analysis of farmland prices in the eastern US (1950-2012) and find a convergence of evidence indicating that large and precisely-estimated climate change damages for recent cross-sections (>1970s), also found in the literature, can be explained by omitted factors extraneous to the agricultural sector. I propose and evaluate a simple strategy to circumvent such nonfarm biases in the form of a Ricardian model based on cash rents (2009-2016). The new damage estimates on non-irrigated cropland and pasture rents cannot be statistically distinguished from zero but point to a cautionary long-term outlook for US agriculture under extreme climate change scenarios. The findings are robust to multiple checks and alternative explanations.</p>