Advantages Of Ricardian Model Of Economics

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(i) Ricardian model. This approach is based on statistical relationships between climatic variables and economic indicators. An advantage of this approach is that producer adaptation to local climate conditions is implicitly considered. Among the disadvantages of using this model are that it regards the farm’s food prices and production prices as constants, and it generally fails to consider key factors that determine agricultural production such as water availability and carbon fertilisation. The Ricardian model has gained popularity among economists and is based on the idea that land value, derived from efficient land use and the existence of competitive markets, represents the present value of expected net revenue. This model calculates the effects of variations in climatic, economic and non-economic variables on the value of arable land using disaggregated information. The studies that are based on the Ricardian model and address the effects of the climate on the agricultural sector include one conducted by Mendelsohn et al, (1994) that explored the effect of climate change on the net value of arable land in the United States. Using information from a county-level cross-section, they found that higher temperatures over the course of the year (except in the fall season) have a negative effect on average land values. Schlenker et al, (2006), also using data from the county level in the United State, along with climatic indicators, land characteristics and socioeconomic
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