Climate change impact assessment: the role of institutional variables

Abstract The climate crisis represents one of humanity’s greatest challenges. The world’s GDP could shrink by as much as 14% by the mid-21st century, particularly affecting the agriculture sector, which is among the most vulnerable. To effectively mitigate climate impacts, assessing them from an economic perspective and examining how institutions and political systems influence societal and economic adaptability is essential. Ricardian models (Mendelson et al., 1994), which incorporate many climatic, physical, and socio-economic variables, have been used to evaluate the impacts of climate change on agriculture. However, these analyses have traditionally excluded political and/or institutional variables. This field requires a comprehensive study on how these variables shape the future impacts of climate change and how they affect the ability to mitigate and adapt to those impacts. Along this paper we document the systematic weaknesses in how existing models treat institutional variables, drawing on examples from both developed and developing country contexts. Our results demonstrate how improved treatment of institutions can enhance both the explanatory power of Ricardian models and their relevance for climate policy design.