This paper develops a “Ricardian” approach for measuring the economic impact of environmental factors such as climate by examining the direct impact of the environmental factor on land prices. Estimating the model using cross-sectional data on climate, farm-land prices, and other economic and geophysical data for almost 3,000 countries in the United States, we ﬁnd that higher temperatures in all seasons except autumn reduce average farm values in the United States and more precipitation in all seasons except autumn increases farm values. Applying the model to a global-warming scenario ﬁnds a range of impacts depending upon whether the model emphasize the grains through crop-land weights or a broader set of crops through crop-revenue weights. The results of the Ricardian approach show a signiﬁcantly lower estimated impact of global warming than the traditional production-function approach.
Mendelsohn, Robert; Nordhaus, William D.; and Shaw, Daigee, "Measuring the Impact of Global Warming in Agriculture" (1993). Cowles Foundation Discussion Papers. 1288.