Climate change impact on agriculture value added

There are obvious evidences showing that climate change will affect adversely the agriculture sector especially those of the developing nations in coming decades. Regarding the climate change effects on the agriculture sector; this study aims to examine the impact of climatic variables on the Iranian agriculture value added. To get the study objective, provincial panel data over 2006-2016 was applied. Temperature and precipitation were applied to examine the effect climate change on agriculture value added. The remaining variables affecting agriculture value added are labor, physical capital including land, livestock and irrigation equipment, human capital measured as the number of the university graduated population, social capital represented by phone lines in rural area and trade index. Trade impact was also investigated using Foreign Direct Investment (FDI) and trade openness variables. Based on the results, the climatic variables’ fluctuations or deviations from their average found to have more significant impact. One degree increase in temperature beyond its long term average is expected to induce a reduction of 5% in agriculture production while the corresponding value for 1% reduction in precipitation is 0.3%. Among the capital variables, physical capital has the highest contribution to agriculture production. Production elasticity with respect to social capital exceeds those of human capital, ranging from 0.17 to 0.18. FDI showed an insignificant effect; however, trade openness was found to affect adversely.