The 83rd RIHN seminar

Climate Change, Agricultural Adaptation, and Food Prices: Evidence from Israel
Iddo Kan^* and Ayal Kimhi^**
September 2012
FIRST DRAFT - PLEASE DO NOT QUOTE WITHOUT PERMISSION: Abstract
This paper adds two important aspects to the literature on the impact of climate change on agriculture. First, it introduces corner solutions into the land allocation decision model, so that farmers can completely cease to produce crops that become inferior as a result of climate change. Second, it accounts for price changes due to international trade barriers by introducing endogenous pricing, so that a decrease in the supply of a certain agricultural product as a result of the land allocation decisions will lead to an increase in its local price, which will lead to subsequent changes in the land allocation decisions. We apply this approach to Israeli data and simulate the effects of projected changes in climate variables on crop portfolios. Israel is particularly suitable for this kind of analysis because of its diverse climatic conditions within a small area, and because most of its vegetative agricultural products are protected from competing imports. The simulations show that the changes in land allocations under partial equilibria are expected to be much more extreme than under fixed prices. In other words, the indirect effects of climate change on cropping decisions through price changes are stronger than the direct effects. Agricultural revenues are expected to increase by 50% under fixed prices, but they are expected to decline by 20% when prices are allowed to change. This highlights the need to allow for price feedback effects when modeling the impact of climate change on agricultural production.; ^* Department of Agricultural Economics and Management, The Hebrew University of Jerusalem, and the Center for Agricultural Economic Research. ^** Corresponding author. Department of Agricultural Economics and Management, The Hebrew University of Jerusalem, the Center for Agricultural Economic Research, the Taub Center for Social Policy Studies in Israel, and Research Institute for Humanity and Nature. Ayal.kimhi@mail.huji.ac.il.
Contact: KURATA Takashi (Associate Professor, RIHN): Research Institute for Humanity and Nature
457-4 Motoyama, Kamigamo, Kita-ku,
Kyoto, 603-8047, Japan
Phone : +81-75-707-2382
Fax : +81-75-707-2513
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Date:	25th September (Tue.) 2012
Time:	0:15 p.m. - 1:15 p.m.
Place:	Seminar Room 5, RIHN ( Access)
Title:	Climate Change, Agricultural Adaptation, and Food Prices:Evidence from Israel
Speaker:	Dr. KIMHI, Ayal (Associate Professor, The Hebrew University of Jerusalem)