CLIMATE CHANGE AND LAND USE IN SOUTHEASTERN U.S.: DID THE "DUMB FARMER" GET IT WRONG?

The assumption of a fixed amount of land remaining in agriculture regardless of changing climate conditions - one of the features of the "dumb farmer scenario" - is likely to bias the estimated social welfare impacts of climate change. In order to quantify this bias, we employ a demand-supply framework to determine both the amount of land allocated to agricultural and nonagricultural uses as well as the social welfare associated with this allocation choice when no market distortions exist. We present an application of our model to the Southeastern United States and simulate the effects of changing climate conditions on land allocation in the region between 2007 and 2040. We find a very modest welfare bias when maintaining current farmland preservation policies and a more substantial bias if we assume that additional land policies are instituted which have spillover welfare effects in other land-using sectors.