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Abstract

This paper measures the economic impact of climate on Malawian Agriculture using the theory of Ricardian rents. We use cross-sectional data on climate, hydrological, soil and household level data for a sample of 8,832 households. The results show that climate affects net farm revenue. There is a non-linear relationship between temperature and revenue on one hand and between precipitation and revenue on the other. Estimated marginal impacts suggest that global warming is counter-productive to net farm revenue. The empirical analysis reveals that 2.5°C increase in warming results in predicted losses of US$0.0081 billion and doubling warming to 5°C amplifies the losses to US$0.018 billion. Reducing precipitation by 7% trims net revenue by 8.13% on a per hectare basis. Undoubtedly, 14% reduction in precipitation is predicted to cause reasonably larger losses of about US$0.1161 billion. It can be inferred that this significantly demonstrates Malawi‟s dependence on rain fed agriculture.

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