Modelling adoption of natural resources management technologies: the case of fallow systems

Option valuation of Philippine forest plantation leases

Consumption pattern, trade, and greenhouse gas leakage in India

An empirical study on effective pollution enforcement in Korea

Governance, economic policy, and the environmental Kuznets curve for natural tropical forests

Land tenure and conflict resolution: a game theoretic approach in the Narok district in Kenya

Politics of institutional reforms in the water and drainage sector of Pakistan

This special issue focuses on the poor and their role in forest degradation. The idea that the poor are both agents of forest degradation and victims of forest loss is not new. Neither is the observation that unsustainable rates of forest use by smallholder farmers arises as a result of a complex interplay of incentives, constraints, and institutional forces. For researchers and policy makers concerned with natural resource use in low-income settings, theory is often useful, but rarely adequate to explain behavioural patterns. Unambiguous theoretical findings tend to flow only from substantial sets of simplifying assumptions, and such assumptions, measured against the observed facts of smallholder agriculture, seem largely untenable. Unfortunately much empirical research on the topic suffers from an opposite problem. In settings where, at any point in time, everything matters and nothing is held constant, econometric findings are frequently weak. The combination of heterogeneity of circumstance, homogeneity of market signals, and limitations on smallholder response generally overwhelms the statistical power of small data sets, often collected with different purposes in mind.

This paper is concerned with the regulation of irrigation water via pricing. The main concepts underlying efficient water use are first discussed and then applied in actual practice to demonstrate empirically how readily available data can be used to implement pricing schemes that achieve efficient allocation of water. The policy discussion includes also equity considerations. The empirical findings, however, reveal that water prices have a small effect on income distribution within the farming sector, thereby supporting the view that water pricing should be designed primarily to increase the efficiency of water use, leaving income distribution considerations to other policy tools.

This paper argues that sharing rules have served to reduce the inefficiency caused by common pool externalities in many developing societies. To this end, a two-sector model of renewable resource use is employed where sharing rules are interpreted as implicit resource taxes. The model is applied to the island economy of Lofanga in the Kingdom of Tonga. The model generates a growth pattern which is consistent with the observed time paths of population and the resource stock. Cyclical fluctuations are weak even in the absence of resource taxation because the intrinsic growth rate of the resource is high.

In this model, well-being depends on leisure, on an environmental renewable resource, and on a non-storable output, which can substitute for the environmental resource or can satisfy needs different from those satisfied by the resource. Individuals have free access to the environmental resource, which is subject to negative externalities: that is, is depleted by the production and consumption of the output. Individuals react to negative externalities by increasing their labour supply in order to produce substitutes for the diminishing resource. The increase in production and consumption that ensues generates further deterioration of the future quality or quantity of the free resource, thus giving rise to a self-reinforcing process. Multiple equilibria and ‘critical mass effects’ are consistent with the functioning of this economy and the resulting level of aggregate production may be higher than is socially desirable.

This special issue focuses on environmental problems related to poverty and economic growth in South Asia and seeks to illustrate the types of economic analyses that can be undertaken to address these problems. The idea for this issue emerged at the inauguration of the South Asian Network of Development and Environmental Economics (SANDEE). The papers presented at SANDEE's inaugural conference demonstrated the need for a tighter connection between environmental and development economics. The study of environmental change in poor countries benefits a great deal from well-established theoretical and empirical investigations of externalities and valuation of non-market goods, the staple of environmental economics as taught in the West. However, it is also closely tied to questions about institutions and why they succeed or fail. The spatial nature of dependence of the poor on local resources also matters. Further, the study of environmental change and of institutions cannot be divorced from policies and economic reforms in poor countries. These are some of the topics discussed in this collection.

This paper presents an adoption model of a resource management technology derived from a three-step decision process (information, adoption, and intensity of adoption).

From the theoretical results it is found that while the levels of technical parameters such as duration and regeneration rate of soil fertility by improved fallow are relevant for adoption, it is misleading to ignore economic and social factors as they are reflected in the discount rate, risk, information, and prices of inputs and outputs.

It is also shown that models that do not take account of the problems of self-selection due to the ability of the potential adopters to acquire and process the relevant information about a technology, lead to biased estimators.

Empirical estimations generally confirm the theoretical results. It is found that the acquisition of information about resources management technology is influenced by age of farmers and actions of official extension services; the adoption decision is influenced by prior utilization, the bundle of land property rights owned, and the level of financial liquidity; and the intensity of adoption is influenced by the percentage of the farm that is degraded.

For a closed economy with human-made capital, non-renewable resource depletion and (possibly) exogenous, hyperbolic technical progress as explicit-form inputs to a production function, there is a feasible development path that is ‘as if’ optimal with respect to hyperbolic utility discounting. On this path, typically, welfare-equivalent income > wealth-equivalent income > Sefton-Weale income > net national product, with possibly dramatic differences among these measures; and sustainable income can be greater than, equal to, or less than NNP. For low enough discounting, growing consumption is optimal even when technical progress is zero. A particular discount rate makes all income measures and consumption constant and (except net national product) equal; and zero technical progress then gives the Solow (1974) maximin as a special case. The optimal path is time-consistent because of the way the utility discount rate is chosen to depend on the economy's stocks, and hence on absolute time.

This paper examines the role forests play in alleviating poverty in rural Malawi. Data from three villages in southern Malawi indicate high levels of forest dependence. Gini decomposition shows that access to forest income reduced measured income inequality at the study sites. Tobit analysis of the determinants of reliance on low-return and high-return forest activities indicates that asset-poor households are more reliant on forest activities compared with the better off; reliance on high-return activities is conditioned also by availability of adult male labor and location. Taken together, the study's findings suggest that forests prevent poverty by supplementing income, and may also help to improve the living standards of households that are able to enter into high-return forest occupations. Policy implications are discussed.

Poverty and environmental degradation or deforestation in developing countries have common determinants in underlying economic and institutional conditions that determine factor and product prices and incentives for migration and resource-depleting activities. These determinants include property rights failures (open access to forest lands) but also ‘government failures’ in the form of policies that indirectly promote resource use and retard poverty alleviation. A general equilibrium analysis identifies influences that such distortions have on poverty and environment. Using a numerical GE model, we consider likely effects of Philippine trade policy reforms of the 1990s on determinants of poverty, deforestation, and agricultural land expansion. These reforms marked a significant shift away from the import substitution industrialization strategy that characterized post-independence Philippine development. The results suggest that though reforms would increase poverty in the short term, in the longer run trade liberalization is poverty reducing. The environmental impact can also be positive, provided liberalized trade is combined with appropriate government action to address market failures.

The Philippine forest plantation lease is modelled as an option whose value arises from market uncertainty and the irreversibility inherent in sunk costs required to establish plantations. The value of this option could be a significant factor in the planting decisions of leaseholders. Real options theory could help explain why in spite of the prospects of adequate financial returns, Filipino leaseholders are slow to establish plantations. The opportunity cost of investing is demonstrated to be highly sensitive to uncertainty of the future value of the plantation. Real options analysis is also utilized to evaluate policies intended by the Philippine government to promote plantation development.

This paper uses household-level survey data from a 1989 Harris poll conducted in 12 developing and three developed countries to examine the empirical relationship between the support for paying higher taxes for environmental protection and per capita national income. Results from ordered probit estimation suggest that as per capita real gross domestic product rises, controlling for other household characteristics, the strength of the support for somewhat higher taxes for environmental protection is falling for low-income countries and rising for high-income countries. The evidence also suggests that environmental protection may be important to people in developing countries during the process of economic growth. The high level of support for environmental protection found among the lower-income African countries included in this study is one result that warrants additional research. Higher economic growth rates are also found to be associated with greater support for environmental protection.

Modeling the factors determining ecological and economic value gives rise to conceptual and methodological problems. Economic valuation typically focuses on use value in the short run, whether within or outside the market. Ecologists, however, are more concerned with ecological values, which provide an underlying long-run notion of value interpreted in a more general sense. This paper investigates the nature of the link between these two aspects of value in the context of a wetland in Northern India, which is also designated as a Ramsar site and a national park. A dynamic simulation model in a ‘STELLA’ environment is set up to understand the linkages between underlying ecological relationships and economic value emerging from them. The simulations point towards a critical dependence of economic value (direct and indirect income derived from the park) on ecological health indices. A non-linearity is to be seen in the impact of an increase in ecological health indices on tourist traffic. This responsive or elasticity with respect to ecological health is more at higher values of the indices, indicating thereby that once efforts at conservation increase the attractiveness of the park above a certain level, the impact may be cumulative and returns in terms of income may rise more than proportionately.

Honduras is vulnerable to catastrophic losses associated with landslides and flooding in the aftermath of hurricanes (Fifi in 1974 and Mitch in 1998, most recently). Taking a watershed-scale approach to targeting conservation programs to promote stability on cropped steeplands in rural southern Honduras would reduce landslide and flooding risks, thus protecting export-earning downstream industries and investments. A case study of the Land Use and Productivity Enhancement project (1990–1998) was conducted to estimate the costs of extension programming to promote three conservation technologies – mulching, vetiver grass barriers, and rock walls – and to assess their efficacy (i.e., cost per ton of soil saved). Geographic Information System mapping tools were applied to suggest conservation priorities for steepland sites that are the most prone to landslides, both to maximize the soil saved per hectare protected and to minimize downstream damages.

The Hartwick–Solow rule for sustainability requires that depletion of natural capital be offset by a compensating increase in other forms of capital capable of generating as much income as the natural capital they replace. Many countries have not been successful in transforming natural capital into other forms of wealth. This paper investigates the process of wealth transformation for Botswana, one of the most successful resource-rich countries. Using an expanded measure of wealth that includes manufactured capital, natural capital and net foreign financial assets, Botswana's per capita wealth has increased over the past 20 years. Government has recovered and reinvested rent. However, examination of the public sector capital budget reveals considerable unproductive investment. While correction for unproductive investments still indicates sustainable development, results suggest that aggregate indicators such as national wealth or genuine savings may be misleading without further attention to the process by which natural capital is transformed into other forms of wealth.