The general argument presented by Arrow et al. runs as follows: government regulation might improve on free market outcomes, since markets sometimes misallocate resources. However, the costs of regulations need to be assessed against their presumed benefits. Benefit-cost analysis is a valuable technique for making such an assessment, even though it was developed for the appraisal of physical investment projects. However, since the technique is not perfect, it should not provide the only input into the process, but rather be part of an array of evidence.

Arrow et al. revisit the case for using benefit-cost analysis in a developed country, the USA, where markets work reasonably efficiently and where the capacity to implement such studies is undoubted. Their recommendations deserve wholehearted support in that context, particularly their recommendation 1 calling for a comparison of gains and losses from regulatory actions. Those who have not worked in government will recognise that most decisions are not in fact made with any form of calculus that we might describe as 'cost benefit thinking'. Indeed, the whole process of policy priority setting is all too often ad hoc, reactive, crisis-based and over-responsive to often ill-informed pressure groups (of all kinds).

This paper integrates soil science variables into an economic analysis of agricultural output among small-scale farmers in Kenya's highlands. The integration is valuable because farmers’ choice of inputs depends on both the status of the soil and socioeconomic conditions. The study uses a stochastic production frontier in which the individual farm's distance to the frontier depends systematically on individual factors. We show the importance of including key soil properties and find that phosphorus has a negative output elasticity, suggesting that farms may be using the wrong fertilizer mix. Hence, the central policy implication is that while fertilizers are generally beneficial, their application needs to be based on better soil information. This highlights the importance of strengthening agricultural extension, increased access to markets and more diversified supply of production inputs.

Estuaries are water bodies, many of which contribute to the sustainable development of cities. Many of them are considered natural landscapes, offering various recreational services to the population. However, estuary degradation is a common problem in developing countries. Ecuador, for example, has a significant problem with the pollution of its estuaries. Machala is one of the most affected cities due to the contamination of these water bodies. This issue has generated negative externalities in the housing market. Thus, our central hypothesis is that rental prices of houses are revalued as their distance from polluted estuaries increases. Using the hedonic pricing approach, our results confirm that the price of a residence increases by US$9.45 for every 100 m farther it is from the closest estuary. This amount constitutes approximately 5.25 per cent of the average rental value in Machala.

Epidemiological environment (EE) could be denned as a set of conditions and processes, both physical and social, that influence the interaction between human beings and disease agents. The human epidemiological environment is shaped by various aspects of development and global change, viz. the influences of human population size, mobility, geographic distribution, urbanization, and nutrition status; modernization (macro-and microeconomic enterprise); loss of indigenous medicinal knowledge; microbial evolution of antibiotic resistance; land conversion and biodiversity loss; agricultural intensification; stratospheric ozone depletion; and climatic change (Daily and Ehrlich, 1995). Health status is affected greatly not only by economic development (e.g. by policies influencing per capita income and its distribution), but also through changes in EE.

This study investigates the determinants of coffee prices received by growers in Costa Rica, paying attention to the impact of environmental, regional, quality, and international aspects in a panel data set for the period 2008–2016. We identify three groups of variables that affect domestic coffee prices. Some of them are external to the control of the coffee growers, such as the international price of green coffee or the power of multinationals; others, such as the altitude where the coffee is harvested or the berries' yield, are related to coffee quality but difficult to modify by coffee growers. The focus of our study is on the third group, which refers to differentiation strategies related to environmental certifications. More specifically, we consider two particularly relevant certifications, which are Fairtrade mills and organic coffee. We find that organic coffee berries received higher prices, but Fairtrade mills report lower average prices than other, non-certified, buyers.

Schistosomiasis is caused by a vector-borne parasite, commonly found in low- and middle-income countries. People become infected by direct contact with contaminated water through activities such as collecting water, bathing and fishing. Water becomes contaminated when human waste is not adequately contained. We administered a discrete choice experiment to understand community preferences for interventions that would reduce individuals' risk of contracting, or transmitting, Schistosoma mansoni. These focused on water access, sanitation and hygiene (WASH) interventions. We compared interventions that target behaviours that mainly put oneself at higher risk versus behaviours that mainly put others at risk. We used two payment vehicles to quantify what individuals are willing to give up in time and/or labour for interventions to be implemented. Key findings indicate that new sources of potable water and fines on open defecation are the highest valued interventions.

In wealth accounting and sustainability assessments, we characterize the non-declining wealth criterion under dynamic average utilitarianism (DAU) as defined by Dasgupta (2001). Under DAU, the objective function consists of total intergenerational well-being divided by the present discounted sum of population from the present to the future. It is shown that, in order for an economy to be on a sustainable path, inclusive wealth should grow at a rate higher than the difference between the discount rate and the share of current population of the discounted future population. Our application to the inclusive wealth index shows that, among other results, the DAU criterion changes sustainability assessments for some developing countries with future demographic change, implying that wealth does not accumulate sufficiently in light of DAU. We also show empirical estimates of the value of population change under total utilitarianism, average utilitarianism, and DAU.

This paper reviews the evolution of the field of environment and development over the last two decades. I argue that a central concern of the field has been the relation between natural resource use, income and growth, under the institutional and market conditions that prevail in developing countries. Particular attention is paid to the demographic and other drivers of change in the asset base, the linkages between poverty, property rights and the allocation of natural resources, the valuation of environmental assets and investment of resource rents, and the development of policies for managing environmental externalities and environmental public goods. I consider how the balance between topics and the treatment of individual topics has changed over time, and indicate how the field might be expected to move in the future.

Economic models for assessing costs of greenhouse gas abatement can be classified as macroeconomic (top-down) models or micro (bottom-up) models. As yet little attention has been focused on the modelling of developing countries. This paper proposes a methodology for integrating the two approaches and illustrates it with the example of India. The results show that a carbon tax would have limited effectiveness in controlling carbon emissions. Investing carbon tax revenues in carbon-abating technologies can give substantial carbon savings. The costs of carbon abatement using the integrated model are higher than those predicted by other global models with India as a sub-region.

Exploiting a natural experiment involving the imposition of a technical regulation by Germany on Indian leather and textile industries in 1994, a firm-level data set is used to study the trade, adaptation and discontinuity effects and how they vary by firm size. It is found that: (a) regulation significantly increases the export revenues of a firm through use of new technology and high-quality imported raw materials – indicating a possible signalling effect; (b) this gain is concentrated only on the upper half of the firm size distribution, i.e., in the 3rd and 4th quartiles; (c) use of imported raw materials significantly explains low exit probabilities of a firm; and (d) there is evidence of a sorting effect – regulation significantly affecting the operation of small firms.

This paper examines environmental and labour market linkages between two agricultural systems-one upstream and another downstream. Using data from the Philippine province of Palawan as a point of departure, the paper develops a dynamic, two-sector model of an agricultural watershed to study the evolution and impact of an erosion externality. Attention focuses on the interplay between erosion generated by the extensive upstream sector and labour productivity in a labour-intensive downstream sector. A key feature of the model is that labour productivity and labour demand downstream are influenced by the externality generated upstream. Production of the externality, in turn, is influenced by wage employment opportunities downstream. Time paths of equilibrium wages are derived. A simulation is used to study the impact of environmental payments to upland households in exchange for allocating labour away from the externality-producing activity. The analysis shows how natural processes and economic interactions between two groups influence the benefits of agricultural intensification.

Reducing emissions from deforestation and degradation (REDD) has been proposed as an economic and extensive source of emission abatement to supplement other long-term climate policies. However, critics suggest an excess supply of REDD credits may disrupt emerging carbon markets and raise north–south equity concerns. In this context, we investigate the economic implications of REDD regulations and future emissions reduction commitments. Numerical model simulations show that unrestricted exchange of REDD units reduces the international carbon price by half and cuts compliance costs by roughly one-third. Developed nations’ requirements for policy supplementarity, which restrict demand for REDD credits, reduce such price impacts but go at the expense of both economic efficiency and benefits to rainforest areas. Instead, unlimited REDD access facilitates climate policy targets to be tightened by almost a quarter at constant compliance cost, tripling the environmental ambition of the Kyoto Protocol and providing considerable wealth transfers to developing countries.

This study investigates intended visitation behavior of tourists toward Rekawa wetland under anticipated climate change (CC) scenarios. An interview-based contingent visitation survey was conducted with 365 foreign and domestic tourists to estimate the effects of CC on future visitation. Based on two IPCC scenarios using two direct and three indirect climatic factors, we composed a CC environmental index. The results show a decline in number of trips equal to 43 per cent and 53 per cent under scenarios 1 and 2 respectively, but the difference is not significant. Foreign and domestic tourists differ significantly with regard to socio-demographic characteristics and beliefs about CC effects at Rekawa. Controlling for such differences, we demonstrate that foreign tourists are less likely than domestic tourists to reduce future visitation to Rekawa due to CC impacts. Still, the future of ecotourism at Rekawa wetland is at risk if adaptation measures are not taken to meet CC impacts.

In response to the CITES ban on trade in elephant ivory, mammoth ivory began to be produced in post-Soviet Russia. We investigate how this substitute to elephant ivory has affected the poaching of elephants. We argue that the early success of the 1989 ivory ban at increasing the African elephant population was driven in part by increasing supply of mammoth ivory. The more recent increases in poaching appear to be driven by increasing demand and falling African institutional quality. We find that absent the 80 tonnes of Russian mammoth ivory exports per annum 2010–2012, elephant ivory prices would have doubled from their $ 100 per kilogram level and that the current poaching level of 34,000 elephants per year may have increased by as many as 55,000 elephants per year on a population of roughly half a million animals.

Payments for environmental services have been popularly used in environmental management and an increasing number of studies assesses their contribution to local livelihoods. This study employs propensity score matching with a dataset of 404 indigenous households in the Central Highlands of Vietnam to evaluate the effect of payments for forest environmental services (PFES) on their livelihoods. Participating in PFES increased households' employment and income from activities related to natural forests. Income from PFES allowed households to enhance productive investment and promote income from cultivation activities. All of this, in turn, increased their annual income, job satisfaction, living expenditures, and reduced the amount of any loan. Additionally, PFES enhanced opportunities to participate in training courses and traditional community activities. This confirms that PFES is not only a good initiative for forest management but also a livelihood policy for communities.

We develop a model of optimal land allocation in a developing economy that features three possible land uses: agriculture, primary and secondary forests. The distinction between those forest types reflects their different contributions in terms of public goods. In our model, reforestation is costly because it undermines land title security. Using the forest transition concept, we study long-term land-use change and explain important features of cumulative deforestation across countries. Our results shed light on the speed at which net deforestation ends, on the effect of tenure costs in this process, and on composition in steady state. We also present a policy analysis that emphasizes the critical role of institutional reforms addressing the costs of both deforestation and tenure in order to promote a transition. We find that focusing only on net forest losses can be misleading since late transitions may yield, upon given conditions, a higher level of environmental benefits.

This paper examines the impact of changes in agricultural land use on deforestation at the local level in the Tapajós Basin in the Brazilian Amazon. It uses exogenous variation in crop-to-beef relative prices to investigate the effects of pasture-to-cropland conversion on deforestation. The findings indicate that increases in crop-to-beef relative prices increase the rate of pasture-to-cropland conversion and reduce the rate of deforestation. The magnitude of the effects implies that land conversion reduced deforestation at the local level by 5,300 square kilometers from 2002 to 2012. This reduction is the equivalent of almost 15 per cent of the total deforestation observed in the region during this period. These results are consistent with a land use model in which cattle ranching and crop cultivation have different input-intensities and there is imperfect mobility of productive factors between municipalities. This model highlights the fact that changes in relative prices affect deforestation through its effect on input prices.

This paper explores a few cooperative aspects of investments in uncertain, real options. By hypothesis some production commitments, factors, or quotas are transferable. Cases in point include energy supply, emission of pollutants, and harvest of renewable resources. Of particular interest are technologies or projects that provide anti-correlated returns. Any such project stabilizes the aggregate proceeds. Therefore, given widespread risk aversion, a project of this sort merits a bonus. The setting is formalized as a two-stage, stochastic, production game. Absent economies of scale, such games are quite tractable in analysis, computation, and realization. A core imputation comes in terms of shadow prices that equilibrate competitive, endogenous markets. Such prices emerge as optimal dual solutions to coordinated production programs, featuring pooled commitments, or resources. Alternatively, the prices could result from repeated exchange.