Biological and Environmental Research - Earth and Environmental System Sciences
Earth and Environmental System Modeling

The Critical Role of Conversion Cost and Comparative Advantage in Modeling Agricultural Land Use Change

TitleThe Critical Role of Conversion Cost and Comparative Advantage in Modeling Agricultural Land Use Change
Publication TypeJournal Article
Year of Publication2020
JournalClimate Change Economics
Volume11
Number01
Pages2050004
Abstract / Summary

The difference in land use modeling approaches is an important uncertain factor in evaluating future climate scenarios in global economic models. We compare five widely used land use modeling approaches: constrained optimization, constant elasticity of transformation (CET), the additive form of constant elasticity of transformation (ACET), logit, and Ricardian. We demonstrate that the approaches differ not only by the extent of parameter uses but also by the definition of conversion cost and the consideration of comparative advantage implied by land heterogeneity. We develop a generalized hybrid approach that incorporates ACET/logit and Ricardian to account for both conversion cost and comparative advantage. We use this hybrid approach to estimate future climate impacts on agriculture. We find a welfare loss of about 0.38–0.46% of the global GDP. We demonstrate that ignoring land heterogeneity or land conversion costs underestimates climate impacts on agricultural production and welfare.

URLhttp://dx.doi.org/10.1142/s2010007820500049
DOI10.1142/s2010007820500049
Funding Program: 
Journal: Climate Change Economics
Year of Publication: 2020
Volume: 11
Number: 01
Pages: 2050004
Publication Date: 02/2020

The difference in land use modeling approaches is an important uncertain factor in evaluating future climate scenarios in global economic models. We compare five widely used land use modeling approaches: constrained optimization, constant elasticity of transformation (CET), the additive form of constant elasticity of transformation (ACET), logit, and Ricardian. We demonstrate that the approaches differ not only by the extent of parameter uses but also by the definition of conversion cost and the consideration of comparative advantage implied by land heterogeneity. We develop a generalized hybrid approach that incorporates ACET/logit and Ricardian to account for both conversion cost and comparative advantage. We use this hybrid approach to estimate future climate impacts on agriculture. We find a welfare loss of about 0.38–0.46% of the global GDP. We demonstrate that ignoring land heterogeneity or land conversion costs underestimates climate impacts on agricultural production and welfare.

DOI: 10.1142/s2010007820500049
Citation:
Zhao, X, K Calvin, and M Wise.  2020.  "The Critical Role of Conversion Cost and Comparative Advantage in Modeling Agricultural Land Use Change."  Climate Change Economics 11(01): 2050004.  https://doi.org/10.1142/s2010007820500049.