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A Structural Ricardian Valuation of Climate Change Impacts on Agriculture in Pakistan

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Mirza Nomman Ahmed

This book presents the economic analysis of the impacts of climate change on agriculture in Pakistan. Particular emphasis is laid on the magnitude of implicit adaptations in overall climate impact assessment and the analysis of selected adaptation options. Using a hedonic pricing model and a revealed choice approach, this study identifies the impacts of climate change on agricultural incomes, depicts the spatial patterns and seasonality of the impacts, and models the future adaptation behavior of farmers in the crop sector. A high sensitivity of farming in Pakistan to climate change is confirmed. With a changing climate and income in mind, farmers in Pakistan are more likely to choose rice, vegetables and maize, whereas they move away from wheat, sugarcane, cotton and fruits.

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Preface ........................................................................................................................................ 7 Acknowledgements .................................................................................................................... 9 List of Figures and Tables ........................................................................................................ 15 1 Introduction and Problem Statement ................................................................................ 19 1.1 Objectives .................................................................................................................. 23 1.2 Conceptual Approach ................................................................................................ 24 2 The Agriculture Sector of Pakistan .................................................................................. 27 2.1 Geography and Soils .................................................................................................. 27 2.2 Climate and Water Resources of Pakistan ................................................................. 31 2.2.1 Climate ............................................................................................................... 31 2.2.2 Water resources .................................................................................................. 36 2.3 Agro-Ecological Zones of Pakistan ........................................................................... 40 2.4 Development of the Agricultural Sector in Pakistan ................................................. 44 2.4.1 Land use pattern in Pakistan ............................................................................... 44 2.4.2 Agricultural Production – Major Crops of Pakistan........................................... 47 2.4.3 History of Land reforms, Farm structures and tenurial systems ........................ 60 2.5 Domestic Agricultural Policy .................................................................................... 66 2.6 Agriculture in the National Economy ........................................................................ 74 2.6.1 Agriculture and the GDP .................................................................................... 75 2.6.2 Employment ....................................................................................................... 76 2.6.3 Trade ................................................................................................................... 78 2.7 Investment and Agricultural Credit ........................................................................... 81 2.8 Total Factor Productivity ........................................................................................... 85 3 The role of climate in agricultural production and local vulnerabilities .......................... 89 3.1 Agricultural Production under Climate Change and the response of crop growth .... 89 12 3.2 Vulnerability to Climate Change in Pakistan ............................................................ 95 3.2.1 Temperature ....................................................................................................... 96 3.2.2 Precipitation ....................................................................................................... 99 3.2.3 Extreme Events ................................................................................................ 102 4 Modeling the Impacts of Climate Change on Agriculture ............................................. 107 4.1 Crop Simulation Approach or Agronomic models .................................................. 108 4.2 Economy-wide models: Computable General Equilibrium Models (CGE) ............ 110 4.3 Econometric Approach: The Standard Ricardian Model ........................................ 111 5 Ricardian Studies- Literature Review ............................................................................ 117 5.1 Conceptual understanding of the Ricardian Approach ............................................ 123 5.2 Climate Change Adaptation in Agriculture ............................................................. 132 5.3 Adaptation and the importance of Local Traditional Knowledge (LTK) ................ 136 5.4 Black Box of Adaptation- The Structural Ricardian Method .................................. 139 6 Standard Ricardian...

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