Assessing the Economic Impact of Climate Change on Paddy Farming in Malaysia: A Ricardian Analysis Approach

Abstract

Given the vulnerability of Malaysia's paddy sector to climate change, this study aims to quantitatively assess the effects of climate variables on paddy yields in the country’s granary areas using a Ricardian regression model. The analysis is based on secondary panel data spanning nine years (2013–2022), covering two planting seasons across eight granary areas in Peninsular Malaysia, resulting in 144 total observations. The findings reveal that paddy yields are highly sensitive to climate, particularly during the vegetative and maturity stages of growth. A rise in maximum temperature negatively impacts paddy yields, even in areas with sufficient irrigation. Marginal impact estimates suggest that increasing temperatures during these critical growth stages will further reduce yields. However, the effect of precipitation on paddy yields was found to be insignificant. These empirical results highlight the importance of tailoring climate adaptation strategies to the specific conditions of granary areas, urging policymakers to incorporate localized climate effects into their decision-making processes.