This paper applies Ricardian approach to measure the effect of climate change on crop production
in Nepal using cross-section data of Nepal Living Standard Survey 2003/04 and climate data from
Department of Hydrology and Meteorology, Nepal. The study examines the relationship between
net farm revenue and climate variables using 656 households of 14 districts covering all climatic
zones of Nepal. Net farm revenue is regressed on climate and socio-economic variables. The
findings show that these variables have significant impact on the net farm value per hectare. More
specifically, relatively low precipitation and high temperature seem to have positive impact on net
farm income during the fall and spring seasons. Net farm income is likely to be increased by
summer precipitation, but not by temperature. Marginal impacts are mostly in line with the
Ricardian model, showing marginally increasing precipitation during summer and winter would
increase net farm income, but reduce by the quarter terms and temperature of these seasons.
Moreover, marginally increasing precipitation would increase farm income in the hilly region, but
reduce in Terai region. Other variables such as ratio of irrigated farm land and obtaining credit are
found to be positive impact on net farm value but not by farm size. Conclusively, the impact of
climate change on agriculture seems to be varied with the temperature and precipitation in different
climatic zones.