In this paper I analyze the forest and debt dynamics in a less developed country (LDC), where the former is a renewable resource and the latter's increase results from the interests to be paid on the current debt minus the balance of trade surplus. Agricultural and industrial goods are produced, and whereas the former requires the converted forest as an input, the latter does not. It transpires that the stock of debt is likely to increase infinitely without repudiation, whereas the stock of forest is likely to oscillate around an equilibrium level. Within this framework, I compare the effectiveness and enforceability of the debt-for-nature and the debt-for-development swaps with respect to tropical deforestation and debt burden issues. Some empirical evidence confirming the theoretical results is provided.

This paper empirically investigates the economic effects of environmental activities. To be specific, it investigates the interactive influence of firms' environmental management and environmental innovation on their productivity. We consider both internal and external environmental management practices of global firms observed from 41 countries between 2017 and 2019. We also consider both inputs and outputs of firms' innovation activities that aim to reduce environmental impacts. Multiple indices are constructed to comprehensively evaluate firms' environmental activities, and productivity is estimated with a semi-parametric method. We find that environmental management and environmental innovation are directly correlated to each other and both substantially promote productivity; however, they tend to substitute each other's positive effects on productivity. Other variables such as globalization, government, labor inputs, and informal competition strongly affect firm productivity too.

Developing countries experience both household air pollution resulting from the use of biomass fuels for cooking and industrial air pollution. We conceptualise and estimate simultaneous exposure to both outdoor and household air pollution by adapting the Total Exposure Assessment model from environmental health sciences. To study the relationship between total exposure and health, we collected comprehensive data from a region (Goa) in India that had extensive mining activity. Our data allowed us to apportion individuals’ exposure to pollution in micro-environments: indoor, outdoor, kitchen, and at work. We find that higher cumulative exposure to air pollution is positively associated with both self-reported and clinically- diagnosed respiratory health issues. Households in regions with higher economic (mining) activity had higher incomes and had switched to cleaner cooking fuels. In other words, household air pollution due to higher biomass use had been substituted away for outdoor air pollution in regions with economic activity.

Village democratization in rural China is found to have profound impacts on many socio-economic aspects, but little is understood as to how welfare impacts may occur through farmers' principal production activities. This study helps to fill this gap by investigating how village democracy affects rural household welfare through these channels, using a unique household survey. The authors first establish a theoretical framework that links democracy to household welfare through changes in production efficiency. Focusing on both agricultural and forest production, they then implement empirical estimation using stochastic production frontier techniques with careful consideration of household heterogeneity in technical efficiency. They find that higher levels of village democracy significantly increase farmers' production efficiency, thereby improving their welfare. To the authors' knowledge, this is the first study on the impacts of democracy on producer welfare using micro-level data.

In this paper we present an example where a domestic import-competing industry can benefit from a pollution tax borne by its consumers. We show that this pollution tax can be similar to a traditional trade barrier (such as a tariff) and can raise the price received by the domestic industry. Given an open economy, we highlight conditions under which domestic producers prefer a higher consumption-based pollution tax than is socially optimal. In contrast, when the economy is closed, we find that producers prefer a pollution tax that is lower than socially optimal. Domestic producers turn ‘green’ only when faced with import competition.

This paper studies soil depletion incentives in a dynamic economic model under two different sources of revenue uncertainty (output and price risk). The focus is on the long-term effects of risk-averse preferences when farming decisions have implications for both expected short-run production and natural topsoil fertility. The analysis shows that the risk properties of the stock variable are crucial for the results arrived. The presence of risk preferences is found to improve soil conservation incentives in a low-input farming system, independent of the source of revenue risk considered. The only case for which soil conservation incentives are weakened is for high-input farming systems under price uncertainty.

JEL classification: Q12, Q20, D81

In familiar models, a decrease in the friction facing mobile factors (e.g., lowering their adjustment costs) increases a coordination problem, leading to more circumstances where there are multiple equilibria. We show that a decrease in friction can decrease coordination problems when a production externality arises from a changing stock, e.g. of pollution or knowledge. In general, the relation between the amount of friction that mobile factors face and the likelihood of multiple equilibria is non-monotonic.

The use of trade measures for environmental purposes has given rise to a series of economic and legal issues. These are explored in the paper through an examination of the United States embargo on imports of shrimp from several countries for environmental reasons, currently being considered by a WTO dispute settlement panel. The paper examines the effect on competitiveness of compliance with the higher standard imposed by the US, the appropriateness of universalizing those standards, and whether the US action is consistent with WTO rules. The major findings are that, in the case of Trinidad, (a) the competitiveness of the affected fishermen was reduced, (b) the US regulation was inappropriate to the conditions which prevailed in the shrimp industry there, and (c) the US action was WTO inconsistent given current interpretation of WTO rules. The paper anticipates that the current case could lead to a review of WTO rules, in favour of the environment.

This paper seeks to understand the link between resource governance and investor expectations in resource-rich countries. We test whether voluntary membership in the Extractive Industries Transparency Initiative (EITI), a public-private partnership that promotes transparency and accountability in the extractives sector, behaves as a credible signalling mechanism to investors that governments in resource-rich countries can manage resource revenue and adhere to sustainable fiscal policies in the medium and long run. Using an interrupted time series analysis coupled with a fixed effects model, we examine whether investor expectations on the price of sovereign debt behave as a credible signalling mechanism in the presence of certain conditions. Results indicate that in some cases there is a significant change in spread on the default price of sovereign debt as a result of announcement of either EITI candidacy or EITI compliance. However, it is clear that EITI membership alone is not a sufficient signal to investors that a country can effectively manage its resource revenues in the long run because the result of EITI implementation is heavily influenced by country-specific conditions.

Using U.S. state-level data for the period 1973–1994, this study models the relationship between emissions, output and pollution abatement by defining an emissions function, in a manner that is consistent with the residual (emissions) generation mechanism and firms' optimizing behavior. It thus accounts for factors that were previously unaccounted for or addressed only individually. Applications using this comprehensive setting can offer more informed insights for policy-making, something that is particularly useful for developing countries that face the environmental degradation that comes together with the benefits of economic growth. Using nonparametric econometric techniques as well as threshold regression, the empirical results show that there is a positive nonlinear relationship between emissions and output, rejecting an inverted-U type of relationship between the two (the Environmental Kuznets Curve, or EKC). In the absence of abatement the relationship turns around, verifying the arguments in the literature that abatement is one of the driving forces for an EKC to emerge.

In this study, the author estimates the demand for improvements in the site quality of Hussain Sagar, a large lake in metropolitan Hyderabad, India. Using both revealed and stated preference approaches, it is estimated that the park provides recreational benefits of US$35 per person for on-site respondents and US$14 for off-site respondents per visit to the park. Given that over one million people visit the lake and its parks every year, based on different scenarios, the annual estimated amenity value of the lake ranges from INR1.76bn (US$29m) to INR3.48bn (US$58m). Thus it is recommended that park authorities double the access fee to the park from the current INR10 (US$0.16). With this increase, the government can potentially earn US$0.36–1.48m in revenues per year, which will make it possible to improve the quality of the lake and its surroundings.

This study examines the effects of growing manufacturing employment on infant mortality across almost 200 Indonesian districts from 1985 to 1995, a time of rapid industrialization. Overall, we find no relationship between growing manufacturing employment in general and infant mortality. However, when the growth in manufacturing is concentrated in more polluting industries (as measured by the construction of a harm-weighted index of predicted emissions from manufacturing), there were economically and statistically significant increases in infant mortality. Finally, we consider a variety of potential causal channels that may change with industrialization (such as housing quality and access to health care) and whose change may help to explain the observed relationships. Although most of the various factors are correlated with infant mortality and the industrialization measures are correlated with changes in several factors, conditioning on these measures does not change our basic results.

Although genetically modified organisms (GMOs) have recently attracted a great deal of public attention, analysis of their economic impact has been far less common. This paper puts forward variants of a simple model of crop production, each one tailored to a particular aspect of transgenic food technology. The focus is on the possibility of monopolization and its consequential welfare costs. Risk factors identified include moderate cost savings from transgenic varieties, high seed storage costs, and high risks of crop loss. The paper also discusses some of the possible remedies including tighter regulation of anti-competitive practices and liberalization of the regulations governing the introduction of new GMOs.

We study entry policies as an alternative form of environmental policy. Given the strong political opposition to standard output subsidies and taxes, several countries have recently used entry policies to promote renewable energy technology, such as solar panels and biofuels. We study a two-stage game in which two regulators choose an entry policy (i.e., tax, subsidy or permit) to maximize domestic welfare. Observing the policy, firms decide the region in which to enter and compete as Cournot oligopolists. We find that both domestic (uncoordinated) policies and internationally coordinated policies increase welfare relative to unregulated settings. However, the welfare gains from international policy coordination are only large when the product is extremely clean. These results indicate that the welfare gains of international policy coordination may only offset the costs of negotiation in relatively clean industries.

This article develops a framework for environmental–economic decision-making in a single project case that includes the ecological sustainability criteria, environmental costs, natural resource scarcity prices and local peoples’ preferences and presents a case study of the lowland irrigated agriculture system. The geographic information system (GIS) technique has been used for evaluating ecological criteria and integrating information for use in the cost–benefit analysis at different levels of computation process. The environmental costs and economic value of water associated with the lowland irrigated agriculture are estimated using both the direct and indirect economic valuation approaches. Various sets of alternatives were designed for promoting sustainable use of resources, and the net present value is estimated in each of these cases by incorporating environmental costs and economic values of water obtained from different methods. The cost–benefit analysis (CBA) carried out in these different cases indicated that diversification of crops, rather than the conventional monocropping system, would promote sustainable resource use and generate higher benefits to the farmers and society, if external costs, such as environmental costs and scarcity value of irrigation water, and ecological sustainability criteria are also considered in the economic decision-making process. The results of the case study also indicated that sustainability criteria could well be incorporated into the CBA in a single project case by addressing local people's concerns, resource scarcity values and ecological sustainability criteria with the use of spatial analysis techniques such as GIS.