Spatial processes in environmental economics: empirics and theory

Economic activities are fundamentally influenced by their location in space, which determines the physical and natural environment in which they take place. Likewise, location defines the social context of economic activity prescribing the particular laws, regulations and social norms to which it should conform. Moreover, spatial location defines proximity, which shapes the costs of accessing factor inputs, product markets and other economic and social institutions. In fact, spatial location mediates most forms of interaction, intended and unintended, that may arise from communication and connections between economic agents. These spatial processes have important implications for estimation, policy evaluation and prediction in models of economic activity. This thesis is comprised of two parts. Part I presents a broad range of issues that arise in estimation due to space and frames these as general spatial omitted variables. I explore the use of semi-parametric estimators to identify the parameters of interest in this general model and derive identification conditions for fixed and local adaptive spatial smoothing estimators. The properties of these estimators are contrasted to OLS and spatial econometric estimators. Part II addresses issues in policy evaluation and prediction. I derive an equilibrium sorting model with endogenous tenure choice that can be used to evaluate the general equilibrium welfare effects of policies that affect local environmental quality. Using a series of simulations, motivated by a real world policy application, I contrast the welfare changes derived under this model to a conventional static approach. By allowing for rental and purchase markets the model I develop provides a far richer characterisation of the complex adjustments that propagate through the property market following policy changes and the contrary impact such policies can have upon renters and owners. The usefulness of the model for applied policy analysis is demonstrated through two applications: The Polegate Bypass and Mortgage Interest Deduction reform

Conserving tropical biodiversity via market forces and spatial targeting

The recent report from the Secretariat of the Convention on Biological Diversity [(2010) Global Biodiversity Outlook 3] acknowledges that ongoing biodiversity loss necessitates swift, radical action. Protecting undisturbed lands, although vital, is clearly insufficient, and the key role of unprotected, private land owned is being increasingly recognized. Seeking to avoid common assumptions of a social planner backed by government interventions, the present work focuses on the incentives of the individual landowner. We use detailed data to show that successful conservation on private land depends on three factors: conservation effectiveness (impact on target species), private costs (especially reductions in production), and private benefits (the extent to which conservation activities provide compensation, for example, by enhancing the value of remaining production). By examining the high-profile issue of palm-oil production in a major tropical biodiversity hotspot, we show that the levels of both conservation effectiveness and private costs are inherently spatial; varying the location of conservation activities can radically change both their effectiveness and private cost implications. We also use an economic choice experiment to show that consumers’ willingness to pay for conservation-grade palm-oil products has the potential to incentivize private producers sufficiently to engage in conservation activities, supporting vulnerable International Union for Conservation of Nature Red Listed species. However, these incentives vary according to the scale and efficiency of production and the extent to which conservation is targeted to optimize its cost-effectiveness. Our integrated, interdisciplinary approach shows how strategies to harness the power of the market can usefully complement existing—and to-date insufficient—approaches to conservation

Using Individualised Choice Maps to Capture the Spatial Dimensions of Value Within Choice Experiments

Understanding how the value of environmental goods and services is influenced by their location relative to where people live can help identify the economically optimal spatial distribution of conservation interventions across landscapes. However, capturing these spatial relationships within the confines of a stated preference study has proved challenging. We propose and implement a novel approach to incorporating space within the design and presentation of stated preference choice experiments (CE). Using an investigation of preferences concerning land use change in Great Britain, CE scenarios are presented through individually generated maps, tailored to each respondent’s home location. Each choice situation is generated in real time and is underpinned by spatially tailored experimental designs that reflect current British land uses and incorporate locational attributes relating to physical and administrative dimensions of space. To the best of our knowledge, this represents the first CE study to integrate space into both the survey design and presentation of choice tasks in this way. Presented methodology provides means for testing how presentation of spatial information influence stated preferences. We contrast our spatially explicit (mapped) approach with a commonly applied tabular CE approach finding that the former exhibits a number of desirable characteristics relative to the latter

Structurally-consistent estimation of use and nonuse values for landscape-wide environmental change

We address the problem of estimating the use and nonuse value derived from a landscape-wide programme of environmental change. Working in the random utility framework, we develop a structural model that describes both demand for recreational trips to the landscape's quality-differentiated natural areas and preferences over different landscape-wide patterns of environmental quality elicited in a choice experiment. The structural coherence of the model ensures that the parameters of the preference function can be simultaneously estimated from the combination of revealed and stated preference data. We explore the properties of the model in a Monte Carlo experiment and then apply it to a study of preferences for changes in the ecological quality of rivers in northern England. This implementation reveals plausible estimates of the use and nonuse parameters of the model and provides insights into the distance decay in those two different forms of value

Investigating the role of solvent type and microwave selective heating on the extraction of phenolic compounds from cacao (Theobroma cacao L.) pod husk

Cacao pod husk (CPH) is a primary waste in the cacao industry that contains favourable natural antioxidants based on phenolic compounds. This study reported an investigation of the effect of extraction parameters to maximise the bioactive yields of CPH extract. The preliminary extraction was focused on high total phenolic content and continued to maximise the total monomeric anthocyanin and antioxidant activity that have the potential to be applied as food additives. The solvent selection and particle size were the key parameters for extraction to reach the maximum phenolic yield (100.4 ± 0.5 mg GAE/g dw). It was confirmed that 50% (v/v) aqueous ethanol was the most appropriate solvent, either based on experimental results or Hansen Solubility parameter prediction. At the same time, the comparison of microwave and conventional heating suggested that Microwave-assisted Extraction was the best method to get high phenolic content due to its selective heating effects. The results showed that the maximum bioactive yields were 0.37 ± 0.0 mg Cy3GE/g dw of anthocyanin and 3.36 ± 0.02 mg TE/g dw of antioxidants obtained under 50 °C and 5 min extraction time. Gallic acid, catechin, epicatechin, coumaric acid and quercetin were identified in CPH extract using High-Performance Liquid Chromatography

Exploring mortgage interest deduction reforms: An equilibrium sorting model with endogenous tenure choice

In most equilibrium sorting models (ESMs) of residential choice across neighborhoods, the question of whether households rent or buy their home is either ignored or else tenure status is treated as exogenous. Of course, tenure status is not exogenous and households' tenure choices may have important public policy implications, particularly since higher levels of homeownership have been shown to correlate strongly with various indicators of improved neighborhood quality. Indeed, numerous policies including that of mortgage interest deduction (MID) have been implemented with the express purpose of promoting homeownership. This paper presents an ESM with simultaneous rental and purchase markets in which tenure choice is endogenized and neighborhood quality is partly determined by neighborhood composition. The public policy relevance of the model is shown through a calibration exercise for Boston, Massachusetts, which explores the impacts of various reforms to the MID policy. The simulations confirm some of the arguments made about reforming MID but also demonstrate how the complex patterns of behavioral change induced by policy reform can lead to unanticipated effects. The results suggest that it may be possible to reform MID while maintaining the prevailing rates of homeownership and reducing the federal budget deficit

Spatially explicit integrated modeling and economic valuation of climate driven land use change and its indirect effects

We present an integrated model of the direct consequences of climate change on land use, and the indirect effects of induced land use change upon the natural environment. The model predicts climate-driven shifts in the profitability of alternative uses of agricultural land. Both the direct impact of climate change and the induced shift in land use patterns will cause secondary effects on the water environment, for which agriculture is the major source of diffuse pollution. We model the impact of changes in such pollution on riverine ecosystems showing that these will be spatially heterogeneous. Moreover, we consider further knock-on effects upon the recreational benefits derived from water environments, which we assess using revealed preference methods. This analysis permits a multi-layered examination of the economic consequences of climate change, assessing the sequence of impacts from climate change through farm gross margins, land use, water quality and recreation, both at the individual and catchment scale