Climate sensitivity of Indian agriculture : do spatial effects matter?

Abstract

Climate change impact studies on agriculture can be broadly divided into those that employ agro-economic approaches and those that employ the Ricardian approach. This study uses the Ricardian approach to examine the impact of climate change on Indian agriculture. Using panel data over a twenty year period and on 271 districts, we estimate the impact of climate change on farm level net revenue. The paper contributes to current knowledge on agricultural impacts by accounting for spatial features that may influence the climate sensitivity of agriculture. The key findings reveal that there is a significant positive spatial autocorrelation – both in the dependent variable, farm level net revenue, and in the error term – and that accounting for this can improve the accuracy of climate impact studies. Climate change results in a 9% decline in agricultural revenues in the base model but incorporating spatial effects lowers this effect to 3%. The available evidence suggests that better dissemination of knowledge among farmers through both market forces and local leadership will help popularize effective adaptation strategies to address climate change impacts.