A Ricardian Analysis Of The Impact Of Climate Change On South American Farms - Chilean Journal of Agricultural Research, Vol. 68 No. 1

"Some people said it was the end of the world...", said Wenceslao Mamio, chief of the Capiana community (Jones, Sam, The Guardian). While it was not the end of humanity, it was the beginning of lost dreams, lost lives, and lost hope for the people that reside along the river Beni, Bolivia, in South America. 

Recently, Bolivia has witnessed an immense amount of rain - breaking the previous record from more than 60 years prior. The Guardian has published an article called "Bolivia after the floods: the climate is changing; we are living that change" by Sam Jones, which links the torrential downpours to climate change, with emphasis on the socioeconomic impact it has had, and in effect, has "marginaliz[ed]" the indigenous peoples even further. 

To understand this issue of global warming and the overall socioeconomic impact it has on residents, not just within Bolivia, but in all of South America, S. Niggol Seo and Robert Mendelsohn in their article "A Ricardian Analysis of The Impact of Climate Change On south American Farms", break the numbers down more extensively. Specifically, the purpose of the study was to gather data in order to estimate the severity climate change has had on South American agriculture, taking into account farmer adaptations. 

The methods used was a Ricardian analysis of 2300 farms to dig further into the effects climate change has had on land values. In order to predict climate change for this century, Seo and Mendelsohn used three Atmospheric Oceanic General Circulation Models (AOGCM): the Canadian Climate Centre, the Centre For Climate Research, and the Parallel Climate Model. Several econometric specifications were tested and five separate regressions were run for all farm types: small household farms,large commercial farms, rain-fed farms, as well as irrigated farms.

Results of the study were staggering: Seo and Mendelsohn found that the increase in temperature and rainfall would predictably decrease land values over time. Under the Canadian Climate Centre scenario, South American farmers will lose on average 14% of their income by the year 2020, 20% by 2060, and 53% by 2100. While using the less severe Centre for Climate System Research scenario, the loss of income was recorded to be only half the above percentages. 

Yet, while viewing the farms using the mild and wet Parallel Climate Model scenario, it is estimated that they will lose only small amounts of income. Further, both small household farms and large commercial farms are under extreme vulnerability to global warming. Small farms are vulnerable to warming, whereas the latter is vulnerable to the increase in rainfall. It is suggested that both rain-fed and irrigated farms will lose their incomes by more than 50% by 2100, with slightly more damaged being done to irrigated farms. 

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