Water and Economic Growth

Several hydrological studies forecast a global problem of water scarcity. This raises the question as to whether increasing water scarcity may impose constraints on the growth of countries. The influence of water utilization on economic growth is depicted through a growth model that includes this congestible public good as a productive input for private producers. Growth is negatively affected by the government's appropriation of output to supply water but positively influenced by the contribution of increased water use to capital productivity, leading to an inverted-U relationship between economic growth and the rate of water utilization. Crosscountry estimations confirm this relationship and suggest that for most economies current rates of freshwater utilization are not yet constraining growth. However, for a handful of countries, moderate or extreme water scarcity may affect economic growth adversely. Nevertheless, even for water-scarce countries, there appears to be little evidence that there are severe diminishing returns to allocating more output to provide water, thus resulting in falling income per capita. These results suggest caution over the claims of some hydrological-based studies of a widespread global "water crisis".Congestible public goods, cross-country regressions, economic growth, freshwater, water scarcity.

The Role of Natural Resources in Economic Development

In recent years economists have recognized that, along with physical and human capital, environmental resources should be viewed as important economic assets, which can be called natural capital. However, the services provided by natural capital are unique. They include the use of resources for material and energy inputs, the "assimilative capacity" to absorb waste, and the provision of ecological services. The latter services are particularly not well understood, and lie at the heart of the debate over the role of natural capital in sustainable development. That is, does the environment have a unique or "essential" role in sustaining human welfare, and if so, are special "compensation rules" required to ensure that future generations are not made worse off by natural capital depletion today? A further debate has emerged over whether environmental degradation in an economy may initially increase, but eventually declines, as per capita income increases. This hypothesis, called the environmental Kuznets curve (EKC) has led to a number of attempts to estimate empirically an "inverted U" shaped relationship between a variety of indicators of environmental pollution or resource depletion and the level of per capita income. Finally, recent economic theories and empirical evidence have questioned whether poorer economies that are endowed with abundant natural resources develop more rapidly than economies that are relatively resource poor. It is possible that resource abundant economies are not reinvesting the rents generated from natural resource exploitation into productive assets, or that resource booms actually divert economic resources from more productive and innovative sectors. The result is a "boom and bust" pattern of economic development. There is evidence of this phenomenon particularly with regard to economic development and land expansion, especially in Latin America. Overall, although our understanding of the role of natural resources in economic development has improved markedly in recent decades, there is still much to learn. How natural resource depletion is affecting the ecological services provided by the environment is one concern. In the case of the poor economies, there is increasing evidence that their prospects for economic "take off" are being adversely affected by the lack of efficient and sustainable management of their natural resource base. Yet the "underpricing" and "undervaluing" of natural capital makes it difficult to design appropriate policies for ensuring that natural resource rents are reinvested in other productive assets of the economy.Economic development, Environmental Kuznets curve, Natural capital, Natural resources, Resource-abundant economies, Sustainable development

The Economics of Soil Erosion: Theory, Methodology and Examples

The purpose of the following paper is to provide an overview of an economic analysis of soil erosion, concentrating particularly on explaining the farm-level economics of soil erosion and discussing with examples the appropriate methodology for measuring on and off-site costs.Soil erosion

Trade and Development in a Labor Surplus Economy

This paper looks at a model in which two countries trade agricultural and manufactured commodities. The manufactured-goods sector produces with increasing returns to scale under conditions of monopolistic competition. It is shown that an increase in land endowment (or an increase in agricultural productivity) can have negative welfare implications for both countries. This outcome can result under three different scenarios: asymmetries across countries, i.e. a North-South model, a neoclassical labor market in the home country's instead of a Lewisian market, and alternative utility functions.international trade, labor surplus economy, land expansion, monopolistic competition, North-South model

Managing the Black Sea Anchovy Fishery with Nutrient Enrichment and a Biological Invader

Many marine systems are subject to high nutrient loadings together with invasions by exotic species. Devising appropriate management responses is an increasing concern and one that has received relatively little attention from researchers. This paper considers the Black Sea anchovy fishery, which has benefited from the relaxation of a nutrient constraint, but has suffered from competition and predation by an invading comb-jelly (Mnemiopsis leidyi). We examine alternative hypotheses about the mechanism triggering outbreaks of the invader (sea temperatures versus nutrients), and the severity of these outbreaks, to see whether a constant escapement policy might be optimal for this fishery. If nutrient levels serve as the triggering mechanism, we argue a mixed blessing effect may be present, so that the effects of nutrient abatement for the anchovy fishery are uncertain. We specify our model empirically and show that a constant escapement policy would be viable under a scenario of reduced impacts from outbreaks of the invader and that nutrient abatement could be beneficial if nutrients trigger outbreaks.Mnemiopsis leidyi, nutrient abatement, stochastic bioeconomic model, biological invasion, Resource /Energy Economics and Policy, O3, O41, Q2, Q20, Q22,

Biodiversity and Geography

The paper combines an economic-geography model of agglomeration and periphery with a model of species diversity and looks at optimal policies of biodiversity conservation. The subject of the paper is "natural" biodiversity, which is inevitably impaired by anthropogenic impact. Thus, the economic and the ecological system compete for space and the question arises as to how this conflict should be resolved. The decisive parameters of the model are related to biological diversity (endemism vs. redundancy of species) and the patterns of economic geography (centrifugal and centripetal forces). As regards the choice of environmental-policy instruments, it is shown that Pigouvian taxes do not always establish the optimal allocation.biodiversity, new economic geography, agglomeration, species redundancy vs. endemism, environmental regulation

Trade and Development in a Labor Surplus Economy

This paper looks at a model in which two countries trade agricultural and manufactured commodities. The manufactured-goods sector produces with increasing returns to scale under conditions of monopolistic competition. It is shown that an increase in land endowment (or an increase in agricultural productivity) can have negative welfare implications for both countries. This outcome can result under three different scenarios: asymmetries across countries, i.e. a North-South model, a neoclassical labor market in the home country's instead of a Lewisian market, and alternative utility functions.international trade, labor surplus economy, land expansion, monopolistic competition, North-South model.

Biodiversity and Geography

The paper combines an economic-geography model of agglomeration and periphery with a model of species diversity and looks at optimal policies of biodiversity conservation. The subject of the paper is "natural" biodiversity, which is inevitably impaired by anthropogenic impact. Thus, the economic and the ecological system compete for space and the question arises as to how this conflict should be resolved. The decisive parameters of the model are related to biological diversity (endemism vs. redundancy of species) and the patterns of economic geography (centrifugal and centripetal forces). As regards the choice of environmental-policy instruments, it is shown that Pigouvian taxes do not always establish the optimal allocation.biodiversity, new economic geography, agglomeration, species redundancy vs. endemism, environmental regulation

Agricultural pricing and environmental degradation

The link between agricultural pricing and land degradation is often difficult to analyze empirically. The authors'understanding of how agricultural supply responds to changing prices in developing countries is incomplete. Even more incomplete is the author's analysis of subsequent impacts on the resource base sustaining agricultural production. Yet available evidence suggests that some important effects do exist, and much further analysis of them is warranted. The social, economic, and environmental relationships that determine the often countervailing effects of price changes on land use and management are extremely complex. Not enough is known about: (1) farming systems in developing countries; (2) open-access use and common property resource rights; (3) land tenure regimes and security; (4) access to technology and other farming systems information; (5) the distribution of wealth and income; and (6) coping strategies for variable climatic, economic, and social conditions. All these factors influence how rural households respond to price changes in terms of managing land and natural resources, and often they may override the incentive effects of price changes. Changes in pricing policies will then be less effective in correcting resource degradation than other approaches to dealing with its underlying causes. Such approaches include providing better research and extension advice, improving property rights and management, and establishing more secure tenure or access rights. At the same time, it is wrong to assume that poor farmers - even those in resource-poor regions far from major markets - are totally isolated from agricultural markets. Virtually all subsistence households require some regular market income for cash purchases of agricultural inputs and basic necessities; many small farmers provide important cash and export crops. So changes in market prices often significantly affect the livelihoods of rural groups. Clearly, the economic incentives emerging from these impacts will affect farmers'decisions to invest in land management and improvements. Just because we do not always understand the economic and social factors determining these incentive effects does not mean they do not exist. Nor should the complexity of the links between price changes and resource management - which sometimes appear counterintuitive - deter further analysis of the role of agricultural pricing in land degradation.Environmental Economics&Policies,Crops&Crop Management Systems,Agricultural Knowledge&Information Systems,Economic Theory&Research,Agricultural Research