Can benefit-cost analysis (BCA) be used in the developing world in the same way in which it is used in developed market economies? The paper by Arrow et al. makes a good case for employing BCA to evaluate environmental, health, and safety regulations in the United States. It offers a number of principles to guide the use of benefit-cost analyses, some of which can be applied to developing countries. Conservation policies in the tropics can help illustrate the relevance of BCA for evaluating regulations in less industrialized countries. I use a set of studies on the Mantadia National Park to show in practical terms how and when BCA can serve as an effective evaluative tool.

Occasionally, households use forests as a source for collecting minor forest products. These goods can serve as an important additional source of income or nutrient supply. Considering this link between forest production and the agricultural sector, we estimate the collection function of the extractive good in a sample selection framework in which the wealth status, the prime agricultural cash source, and paid labour are assumed to influence the decision about collecting minor forest products. Results show that poorer households are more dependent on minor forest products. We also find that returns to labour in the agriculture and forestry sectors are not significantly different. We use these returns to establish shadow prices for the extractive good and in turn, use these to estimate price and income elasticities for the good's demand. The minor forest product is a normal good with unit elasticity; shadow income elasticity is equal to 0.82.

This paper builds on the earlier development of WAS – a method of dealing with water issues that focuses on water values rather than water quantities and takes into account public values that are not simply private ones (see Fisher et al., 2005). WAS can be used for infrastructure or policy planning, but it can also assist in the resolution of water disputes. Indeed, WAS-guided cooperation in water can turn what appears to be a zero-sum gain into a win-win situation. It is shown that if WAS sets the rules for cooperation, then, when all claimants use those rules, the coalition of all of them together is stable. Results for possible coalitions of Israel, Jordan, and Palestine are given for varying assumptions as to water ownership. The gains from cooperation are compared and analyzed. WAS-guided cooperation is seen to make the value of ownership shifts relatively trivial.

Environmental policies are characterized by salient short-term costs and long-term benefits that are difficult to observe and to attribute to the government's efforts. These characteristics imply that citizens’ support for environmental policies is highly dependent on their trust in the government's capability to implement solutions and commitment to investments in those policies. Using novel survey data from Mexico City, we show that trust in the government is positively correlated with citizens’ willingness to support an additional tax approximately equal to a day's minimum wage to improve air quality and greater preference for government retention of revenues from fees collected from polluting firms. We find similar correlations using the perceived quality of public goods as a measure of government competence. These results provide evidence that mistrust can be an obstacle to better environmental outcomes.

This paper evaluates how the marginal abatement cost (MAC) and the efficiency cost of policies will change at the regional and global level if reduction targets are based on consumption-based emissions (CBEs) rather than on production-based emissions (PBEs). Using a CGE model, this paper finds that the MAC of CBEs is in general higher than that of PBEs, mainly due to limited substitution possibilities between energy and non-energy goods in final consumption compared to those in the choice of inputs in production activities under PBEs. Interestingly, when policies such as border carbon adjustments (BCAs) are introduced to reduce CBEs, net importers of emissions are better off, while net exporters of emissions are worse off in this approach compared to the PBEs target. If border tariffs are not allowed, the CBEs target turns out to be worse both for net importers and exporters of emissions.

Outdoor air pollution continues to be a challenging health issue, even as countries experience economic growth. By exploiting a unique transboundary setting in East Asia, we study the impact of an increase in particulate matter (PM) concentrations on fetal deaths. Due to the westerlies in the mid-latitudes, residents in South Korea at times experience intermittent exposure to high levels of air pollution. Using such atmospheric setting, we estimate a reduced-form impact of high PM events on fetal deaths, which captures in utero exposure to pollution. Controlling for local weather and pollution trends, regression results indicate that high PM events in Beijing lead to a significant increase in daily fetal mortality rates in Korea, by approximately 7.4 per cent. This research finding provides lower-bound estimates of not only negative spillovers manifested in fetal health but also the impact of pollution on the health of the Chinese population and calls for a need to tackle transboundary air pollution via international cooperation.

It has been recognized that extra incentives for firms' compliance with pollution regulations would be created under state-dependent enforcement as Harrington (1988) has shown theoretically. However, the extent of the overall improvement in compliance is expected to be different according to the pollution control costs and industrial structures of any given country. This paper empirically examines, for the first time, the effectiveness of an imposition of higher fines for repeated violations and state-dependent enforcement in terms of the reduction of violation days, by simulating emitting behavior for 65 sub-industries in the Korean manufacturing industry over the period 1987–1989. State-dependent enforcement was found to be more effective than an imposition of higher non-compliance fines for repeated violations in regard to the number of sub-industries exhibiting persistent non-compliance. However, the number of fully complying sub-industries was found to be slightly higher under an imposition of higher non-compliance fines for repeated violations. In Korea, it would therefore be desirable to discriminate against certain industries with enforcement systems of different intensity based on their abatement cost structures rather than uniformly introducing a state-dependent approach.

Fishers in developing countries do not have the resources to acquire advanced technologies to exploit offshore fish stocks. As a result, the United Nations Convention on the Law of the Sea requires countries to sign partnership agreements with distant water fishing nations to exploit offshore stocks. However, for migratory stocks, the offshore may serve as a natural marine reserve (i.e., a source) to the inshore (i.e., sink); hence these partnership agreements generate a spatial externality. In this paper, we present a bioeconomic model in which a social planner uses a landing tax (ad valorem tax) to internalize this spatial externality. We found that the tax must reflect the biological connectivity between the two patches, intrinsic growth rate, the price of fish and cost per unit effort. The results are empirically illustrated using data on Ghana.

When continuous monitoring of individual emissions is not feasible, policy makers need to investigate what other options are available and how best to provide appropriate incentives for pollution reduction. This paper offers an analysis of some such options with a view to identifying and suggesting appropriate policy measures for emission control from automobiles in Delhi.

Developing countries are known to exploit their resource frontier to achieve growth objectives and reduce poverty. This can lead to long-term positive outcomes or – if resource exploitation is unsustainable – lose–lose outcomes that leave populations and ecosystems worse off. This paper introduces a dynamic model of resource exploitation to explain how regions may succumb to, avoid or escape this negative outcome. The theoretical model characterizes a frontier community that uses soil as an input into agricultural production. The model shows that there may be a critical point in the soil stock that determines whether agricultural activities lead to sustainable development or a collapse in local income. This suggests that, in the event of a resource collapse, temporary adjustments to the system may permanently rehabilitate the resource base and change a community's development pattern. Calibration of the model to several frontier states of the Brazilian Amazon points toward an overall outcome of steady development.

Much of the debate between the European and US positions about the labeling of genetically modified (GM) foods has been whether consumers perceive labels as a source of information or as a signal to change behavior. In this paper we provide an experimental framework for examining these roles of information and signaling. While previous studies have focused on the impact of labels on consumer behavior, our interest is also in what happens prior to the expression of aversion to GM-labeled foods. In particular, the experiment design allows the researcher to estimate a lower bound of the informational impact of labels on GM food aversion. The other novel feature of this paper is that, unlike earlier studies, it uses subjects from a developing country.

This paper investigates the impact of structural adjustment policies on deforestation taking place when the agricultural frontier advances into forest reserves in Nicaragua. A computable general equilibrium model incorporating deforestation by squatters is used for policy simulations. The opportunity cost of migrating to the frontier does not simply depend on wage income opportunity, but also on market prices of basic grain which determine the capacity to consume beyond subsistence food-level given a certain real wage. Reducing public expenditures both conserves forests and enhances economic growth, while showing positive distributional effects. On the other hand, a strong conservation trend following a sales tax increase is driven by increasing poverty in rural areas. Noticeably, there are policies which initially intensify deforestation, but turn out to ease the pressure on forests over time. Rapid economic growth does not ensure less pressure on forest reserves.

This essay offers a limited study of income sustainability for one oil-exporting country: Iraq. The nature of the study motivates a discussion of some theoretical issues concerning levels of non-renewable resource depletion and re-investment as well as related questions about the substitutability of man-made and natural capital and critical natural capital. The results of the study, which decomposes oil revenues into consumption and capital portions, suggest that the re-investment in physical capital offset the depletion of natural assets arising from oil extraction in the period under consideration. Because of the lack of data, a complete study of the capital balance is not feasible. Consequently the findings are tentative.

This paper studies the impact of a World Trade Organization withdrawal of trade concessions against countries that fail to respect globally recognized environmental standards. We show that a punishing tariff can be effective when environmental and trade policies are endogenous. When required standards are not too stringent with respect to the marginal damage of pollution, compliance along with free trade as a reward is the unique equilibrium outcome. A positive optimal tariff in the case of non-compliance prevents complete relocation to pollution havens, but only works as a successful credible threat and does not emerge in equilibrium.

We examine the environmental impacts of a cash transfer program in rural Zambia and investigate whether variation in market access is associated with heterogeneous impacts on natural resource use. We consider households’ use of firewood, charcoal, bushmeat and land for farming, as well as their ownership of non-farm businesses. We find that cash transfers increase the likelihood of charcoal consumption as well as the amount consumed for those living close to paved roads. The transfers also enable households to increase the size of their farms and establish non-farm businesses. These impacts are most pronounced for those living far from paved roads. While remoteness is associated with farm expansion in response to the cash transfer, more education causes those receiving the transfer to decrease the size of their farms. This impact heterogeneity has important implications for sustainable development.

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.

In an overlapping generations model with multiple steady states, we analyse the impact of endogenous environmental policies on the relevance of history and expectations for the equilibrium selection. In a polluting regime, environmental preferences cause an increasing energy tax which raises the risk that the economy transitions to the inferior equilibrium under pessimistic expectations. However, higher environmental preferences imply an earlier switch to the clean energy regime. Then, the conflict between production and environmental preferences is resolved and the prospects of selecting the superior equilibrium improve, since positive expectations become more relevant. In an empirical analysis we find that people with environmental preferences tend to have more optimistic expectations about economic development. Using these findings to analyse the steady-state dynamics implies that agents with environmental preferences support higher energy taxes and switch to clean production more quickly. Due to their optimism, the likelihood of reaching the superior stable steady state increases.

We present evidence that international trade may exacerbate the initial unequal distribution of hydric resources. This result is driven by the fact that countries exporting agricultural goods are relatively abundant (with respect to capital) in the combined availability of water and arable land but, in absolute terms, scarce in capital and not richer in water in comparison to more developed ones. Due to both the scarcity of capital and the lower relative price of natural resources with respect to capital, the total value of production in these developing countries is modest, implying that international trade can lead to a less even distribution of the water content of consumption. Policies sustaining water prices and, more generally, those of natural resources (or lower capital costs) may contribute to offsetting this effect and allow for trade to play a positive role in reducing the uneven distribution of water endowments.