| Summary: | This study examines the impact of changing climate and product market conditions on crop yield and land allocations in Nepal. Zellner’s seemingly unrelated regression approach is used to estimate the acreage and yield functions. The potential impact of price endogeneity on estimated parameters is corrected using an instrumental variable method. The results show that farm input prices and output prices play a crucial role in determining acreage allocation. While the variation in daily temperature during planting season affects acreage allocations for all crops except wheat, the total precipitation is critical for upland crops, particularly for millet. Literacy rate and the number of rainy days significantly affect yield for most crops. Moreover, the rising winter warming is enhancing wheat and potato yields. The results also show that a ten percent decrease in the number of rainy days during the growing season is likely to reduce yields for rice, maize, and wheat by 4.8, 1.7, and 0.8 percent, respectively.
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