Essays on climate change, agriculture and production efficiency

Climate change would likely pose significant challenges to agriculture. Previous assessments of the effect of climate change on agriculture show that developing countries are more vulnerable than developed countries. In this thesis, we contribute to the existing debate on the economic effects of climate change on land rents and production decisions. In the first chapter, we assess the capitalisation of climate change on land rental prices and net revenues of Mexican farms. Using cross-section data on the same farmsteads, we discover that using net revenues or land rental prices as measures of land rents in the Ricardian Hedonic model leads to different predictions. In the second chapter, we investigate how changes in climate would likely modify current crop and livestock choices in Mexico. Taking advantage of a plot-level dataset, we examine substitution patterns among arable and non-arable activities and find that accounting for such patterns in the discrete choice models leads to radically different projections. Taking climate change as an opportunity to produce food more efficiently, we use the Stochastic Frontier approach to assess the performance of Mexican farms in the third chapter. We find that farmers can produce more using the same amount of inputs, which can partially reduce or fully offset harmful effects of climate change