The potential importance of natural resources for the livelihood of poor rural households has long been recognized but seldom quantified and analyzed. In this paper, we apply poverty and inequality measures to national and community level data sets to explore the impacts of resource extraction on rural welfare. Our findings suggest that natural resource extraction reduces both income inequality and poverty. Results from a simulation analysis at the community level indicate that poverty may be reduced, in the short-run, by increases in the price of a non-timber forest product.

Mitigating the harmful effects of development projects and industries (negative environmentalism) is inadequate, especially in resource-dependent economies whose resources are at risk from other forces. While positive environmentalism includes conservation projects, the non-market benefits of such projects are difficult to evaluate. This paper provides and illustrates a method for evaluating the indirect, watershed benefits of a tropical forest, without resorting to survey methods. The conservation of trees prevents a reapportionment from groundwater recharge to runoff that would otherwise occur. The value of the water saved is then valued at the shadow prices obtained from an optimizing model. An illustration of the model shows that watershed conservation projects may have very high payoffs, even before assessing existence values and other forest amenities.

This paper evaluates the effectiveness of the Program for Pollution Control Evaluation and Rating (PROPER) in Indonesia. PROPER, the first major public disclosure program in the developing world, was launched in June 1995; though it collapsed in 1998 with the Asian financial crisis, it is currently being revived. There have been claims of success for this pioneering scheme, yet little formal and conclusive analysis has been undertaken. We analyze changes in emissions concentrations (mg/L) using panel data techniques with plant-level data for participating firms and a control group. The results show that there was indeed a positive response to PROPER, especially among firms with poor environmental compliance records. The response was immediate, and firms pursued further emissions reductions in the following months. The total estimated reductions in biochemical oxygen demand (BOD) and chemical oxygen demand (COD) were approximately 32 per cent.

The paper measures the changes in environmental quality that occurred in the early years of economic transition for 12 former centrally planned economies using the information on 13 pollution effluents in the manufacturing sector and the energy intensity of the value added. For the manufacturing sector, the change in the pollution is separated into scale and composition effects. Pollution decreases substantially in most countries because of large decreases in aggregate manufacturing activity. The composition effect is more diverse depending on the effluent type and country. We examine the reduced form relationship between composition effects coupled with the energy intensity rate of change and the extent of policy reforms. The results indicate a strong relationship between environmental improvement and price liberalization, trade and foreign exchange reforms, enterprise restructuring, and privatization reforms. In addition, the amplification of the environmental regulatory regime causes a shift towards a less-polluting allocation of resources.

We analyze a two-sector growth model with directed technical change where man-made capital and exhaustible resources are essential for production. The relative profitability of factor-specific innovations endogenously determines whether technical progress will be capital- or resource-augmenting. We show that any balanced growth equilibrium features purely resource-augmenting technical change. This result is compatible with alternative specifications of preferences and innovation technologies, as it hinges on the interplay between productive efficiency in the final sector, and the Hotelling rule characterizing the efficient depletion path for the exhaustible resource. Our result provides sound micro-foundations for the broad class of models of exogenous/endogenous growth where resource-augmenting progress is required to sustain consumption in the long run, contradicting the view that these models are conceptually biased in favor of sustainability.

This paper examines agricultural intensification and its impact on deforestation in a frontier region of the Philippines. Panel data covering the period 1994–2000 are used to study labor demand and resource reallocation in response to lowland irrigation development. Results illustrate how irrigation has led to changes in employment, incomes, and activities at the forest margin. Findings indicate that the off-farm employment opportunities created by irrigation development have helped to reduce rates of forest clearing. Although some initial employment gains have been reversed, wage-induced increases in agricultural productivity in the uplands have reduced forest pressure. Results show that lowland irrigation has had direct, indirect, and lagged effects on rates of forest clearing, and that a virtuous cycle may be at play, with irrigation leading to both poverty reduction and reduced forest pressure.

This paper presents the results of a dichotomous choice contingent valuation (CV) study of reduced flood risks in Bangladesh. Sensitivity of willingness to pay (WTP) to varying risk exposure levels is tested in a ‘natural experiment’, targeting floodplain residents facing regular annual flooding and a disaster flood once every five to ten years. Accounting for price, income and education levels, both subjective risk aversion and objective baseline risk exposure affect stated WTP for a common level of flood protection. We find a number of problems with the CV application in this specific developing country context. Half of the respondents are unable to pay in financial terms, but are willing to contribute in kind. The combined use of a monetary and non-monetary measure of WTP would have lowered the number of zero bids considerably. A test-retest carried out six months after the original survey shows that the stated WTP values are reliable.

Based on decision theory, this paper suggests a four-hurdle model to deal with zero and missing responses in the contingent valuation method with open-ended bidding, which is used to analyze the willingness to pay for blue skies in Beijing where air pollution is known to be very serious. The mean and the median of the predicted willingness to pay for blue skies per household are, respectively, 120.15 and 128.60 yuan, less than 0.2% of the per capita annual disposal income in Beijing. This is very low compared to results from studies of other countries. The empirical results also indicate that the four-hurdle model is superior to the Tobit model and raw data estimation.

A lack of information on environmental protection values, especially non-market values, has contributed to wetland degradation in the Mekong River Delta. To fill this information gap, this study uses choice modelling to estimate the biodiversity protection values of Tram Chim National Park, a typical wetland ecosystem of the Delta. The estimated net social benefit of a proposed protection program ranges from USD0.52 million to USD1.84 million. This suggests that the program's implementation would improve social welfare. Some choice modelling issues, including the use of focus groups, aspects of questionnaire designs, and different survey modes, are discussed in the context of a developing country application.

This paper considers self-enforcing international environmental agreements when countries are asymmetric with respect to emission-related benefits and environmental damage. Considering these asymmetries simultaneously yields large stable coalitions, also without the option of transfers between signatories. However, these large stable coalitions are only possible if they include countries that have relatively high marginal benefits and a relatively low marginal environmental damage. This type of countries hardly contributes to the common good and the gains of cooperation from including this type of countries in the stable coalition are small. This confirms a persistent result in this literature that large stable coalitions usually go hand in hand with low gains of cooperation. Without the option of transfers it is always better to have a small stable coalition with countries that matter than a large stable coalition with countries that do not matter. Only with transfers might a large stable coalition be able to perform better.

The environmental Kuznets curve (EKC) is a hypothesis stating that pollution rises with income at low income levels but falls at higher ones. We analyse the EKC in a representative consumer model in which pollution is generated by consumption and can be abated. We show that at low income levels no abatement is optimal and pollution increases with income. Once abatement expenditures are positive, we demonstrate that satiation in consumption is not only sufficient to find an EKC, but a tendency to satiation—or in other words the condition that environmental quality is a normal good—is even necessary if we assume a standard functional form for the pollution function. Finally, we reconsider the results of two related models of the literature: We verify that the relationship between the income elasticity of demand for environmental quality and the EKC is ambiguous.

(JEL: D62, O40, Q20)

The risks associated with increasing climate variability pose technological and economic challenges to societies which are dependent on agriculture for their livelihood. In Southwestern Cameroon the natural variability of rainfall and temperatures contribute to variability in agricultural production and food insecurity. This paper explores the impact of climate variability in Southwestern Cameroon on food availability. It examines farm household's vulnerability to food availability relating to climate, and reviews the interplay of climate, agriculture, and prospects for food security in the region. An econometric function directly relates farm income and precipitation, in order to statistically estimate the significance of farm-level adaptation methods. The results reveal that precipitation during growing and adaptation methods through changes in soil tillage and crop rotation practices have significant effects on farm returns. An essential precondition for food security and overall agricultural development in Southwestern Cameroon is a dynamic agricultural sector brought about both by steady increase in agricultural production and by greater efforts in farmer support, to enable farm households to take advantage of the opportunities and to minimize the negative impacts of climate variation on agriculture.

This paper explores the impact of conservation agriculture (CA) on the environmental efficiency of maize farmers in Zambia, by comparing nitrogen fertilizer recovery between farms that practise CA and those using conventional farming technologies. The Nitrogen Index Tier Zero tool is employed in generating a nitrogen balance sheet at the farm level. As CA technology may improve farmers' access to better technology, we employ a selectivity-corrected meta-frontier approach to account for potential selection bias and technology heterogeneity. The empirical results suggest that farmers practising CA are environmentally more efficient than conventional farmers. The findings also show that environmental efficiency is significantly influenced by access to credit, farming experience and years of schooling of household head, land ownership and distance to markets. Moreover, farmers practising CA are found to be technically more efficient than those using the conventional technology.

This paper develops and estimates a structural equilibrium pollution model, in which the price and quantity of industrial pollution are jointly determined by the intersection of environmental demand and supply functions. The industrial environmental demand function relates industrial pollution intensity to the local price of pollution, while controlling for characteristics such as sector, scale, and ownership. The local environmental supply function specifies the pollution price imposed by the host community as pollution rises. The model provides a good fit to available data on provincial variations in China's pollution levy, or industrial emissions charge. Our results also suggest that Chinese industry has reduced emissions significantly in response to the levy.

The collective action problem around water use and management involves solving both the problems of provision and appropriation. Cooperation in the provision can be affected by the rival nature of appropriation and the asymmetries in access. We report the results of two field experiments conducted in Colombia and Kenya. The irrigation game was used to explore the provision and appropriation decisions under asymmetric or sequential appropriation, complemented by a voluntary contribution mechanism experiment which looks at provision decisions under symmetric appropriation. The overall results were consistent with the patterns of previous studies: the zero contribution hypotheses is rejected whereas the most effective institution to increase cooperation was face-to-face communication, although we find that communication works much more effectively in Colombia than in Kenya. We also find that the asymmetric appropriation did reduce cooperation, though the magnitude of the social loss and the effectiveness of alternative institutional options varied across sites.

This study revisits and updates a 1999 economy-wide analysis predicting that increases in tourism would result in rapid economic as well as demographic growth on the Galapagos Islands. The following six years witnessed sharp growth in tourism; a restructuring of tourism around larger cruise ships and new, larger hotels; and rapid population growth. Our findings indicate that total income (that is, the gross domestic product) of the Galapagos increased by an estimated 78 per cent between 1999 and 2005, making the Galapagos economy among the fastest growing in the world. Tourism continued to be far and away the major driver of economic growth. Nevertheless, population growth via new migration to the islands nearly erased the effect of economic growth on per-capita household income. These findings raise questions about the compatibility of ecotourism and conservation in this unique ecological setting.

This paper analyzes the underlying determinants of rural land conflicts in Brazil involving squatters, landowners, the federal government, the courts and INCRA, the land reform agency. A model is presented whereby squatters and landowners strategically choose to engage in violence. Landowners use violence as a means of increasing the likelihood of successful eviction of squatters, and squatters use violence to increase the probability that the farm will be expropriated in their favor as part of the government's land reform program. The model's predictions are tested using state level data for Brazil for 22 states from 1988 through 1995. It is shown that the government's land reform policy, which is based on expropriation and settlement projects, paradoxically may be encouraging both sides to engage in more violence, rather than reducing conflicts.

Recent research documents the adverse causal impacts on health and productivity of extreme heat, which will worsen with climate change. In this paper, we assess the current distribution of heat exposure within countries, to explore possible distributional consequences of climate change through temperature. Combining survey data from 690,745 households across 52 countries with spatial data on climate, this paper suggests that the welfare impacts of added heat stress may be regressive within countries. We find: (1) a strong negative correlation between household wealth and warmer temperature in many hot countries; (2) a strong positive correlation between household wealth and warmer temperatures in many cold countries; and (3) that poorer individuals are more likely to work in occupations with greater exposure. While our analysis is descriptive rather than causal, our results suggest a larger vulnerability of poor people to heat extremes, and potentially significant distributional and poverty implications of climate change.

The number of protected areas around the world has significantly increased. However, the effects of this policy on the wellbeing of local households are still under debate. Using pre-treatment characteristics and household surveys with highly disaggregated geographic reference, we explore how national parks affect the wages of local workers in Costa Rica. We use matching techniques to control for the endogenous location of parks. We find that parks' effects on wages are, on average, positive and significant, but the magnitudes vary. Wages close to parks are higher for local workers living near tourist entrances. However, there is no robust evidence of positive effects for those close to parks but far away from tourist entrances. With our individual-level data, we also show that the positive effects on local households might not be as large as suggested by previous studies that use aggregated level data containing both local and immigrant households.

Climate change is predicted to increase the frequency of extreme weather events, increasing the vulnerability of smallholder farmers dependent on rain-fed agriculture. We evaluate the extent to which farmers in Malawi suffer crop production losses due to extreme weather, and whether sustainable land management (SLM) practices help shield crop production losses from extreme events. We use a three period panel dataset where widespread floods and droughts occurred in separate periods, offering a unique opportunity to evaluate impacts using data collected immediately following these events. Results show that crop production outcomes were severely hit by both floods and droughts, with average losses ranging between 32–48 per cent. Legume intercropping provided protection against both floods and droughts, while green belts provided protection against floods. However, we find limited evidence that SLM adoption decisions are driven by exposure to weather shocks; rather, farmers with more productive assets are more likely to adopt.