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Considering the scale of global warming, we make an attempt to assess the impact of climate change on Macedonian agriculture. Farmers’ adaptation is taken into account by using an alternative specification of the Ricardian model based on the use of aridity indices to capture the non-linear response of farmland values to temperature and precipitation. Econometric results indicate that winter and spring aridity indices influence unit gross returns of crop farms. A decomposition analysis of aridity indices between temperatures and precipitations results in the derivation or marginal responses of unit gross returns of crop farms to seasonal temperatures and precipitations.


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