Thierry Bréchet, Carmen Camacho, and Vladimir M. Veliov
This chapter extends the use of integrated assessment models (IAMs) by defining rational policies based on predictive control and adaptive behavior. After a review of the main IAMs, the concept of Model Predictive Nash Equilibrium (MPNE) is introduced within a general model involving heterogeneous economic agents operating in (and interfering with) a common environment. This concept captures the fact that agents do not have a perfect foresight for several ingredients of the economy and the environment. The canonical IAM (DICE) is used as a benchmark. The concept of MPNE is then enhanced with adaptive learning about the environmental dynamics and the damages caused by global warming. The approach is illustrated by some numerical experiments in a two-region setting.
Roger Claassen, Joseph Cooper, Cristina Salvioni, and Marcella Veronesi
Although agri-environmental programs have a long history in the United States and the European Union, such programs began to play a larger role in federal farm policies in the 1980s, in part due to greater concern about environmental damage from agricultural production. Both regions rely primarily on a mixture of three types of policy mechanisms to address agri-environmental issues: voluntary incentive-based programs, regulatory programs, and cross-compliance programs. This chapter provides an overview and comparison of EU and US agri-environmental programs. It then reviews what is known about the environmental and land use impacts of these programs. The chapter also discusses US and EU data sources that are key to analysis of agri-environmental programs and their land use impacts.
Salomón Salcedo, Fernando Soto-Baquero, José Graziano Da Silva, Rodrigo Castañeda Sepúlveda, and Sergio Gómez Echenique
Structural reforms implemented at both the macroeconomic and sector levels beginning in the 1980s played a fundamental role in the formation of Latin America's heterogeneous agricultural sector. Nearly all countries in the region embraced the same reform principles. Typically, these reforms saw unilateral trade liberalization, the elimination of subsidies, the privatization or closure of state-owned firms, the dismantling of research and extension institutions or a significant curtailment of their activities, and the deregulation of markets for agricultural goods and services. This chapter reviews these reforms, the challenges each country has faced in their implementation, and their impacts on the agriculture sectors of Latin American countries, and also considers the role of the state in agriculture and rural development.
Carlos José Caetano Bacha
This chapter analyzes the evolution of agriculture in Brazil from the early sixteenth century until the second decade of the twenty-first century. It focuses on seven domestic and external conditioning factors that have stimulated and supported the sector’s expansion in Brazil. These factors and the way that they have impacted agricultural expansion and will continue to drive Brazil’s agricultural sector for at least the next two decades. Given the availability of fallow arable land, at current productivity levels, this idle area could be used to double crop production. The transference of road operation to the regulated private sector will lead to improved road surfaces and maintenance, thereby facilitating the transportation of agricultural production to exporting ports. The reduction of agricultural sector subsidies and the increased forest conservation efforts by the European Union should improve Brazilian agriculture’s competitive position in many foreign markets currently served by EU farmers. The increasing share of Brazil’s agricultural production sold in world markets makes the country’s agricultural sector more vulnerable than ever to uncontrollable outside forces. World economic growth, especially that of China and the European countries, is a necessity if the Brazilian agricultural sector is to continue expanding and improving efficiencies. Most Brazilian agricultural inputs continue to be produced by foreign companies or their Brazilian subsidiaries. These overseas entities are a very strong force in the domestic inputs market and represent another uncontrollable factor that affects local farmers’ earnings and Brazil’s balance of trade.
Ousmane Badiane and Tsitsi Makombe
This chapter reviews the evolution of development theory and practice, the role of agriculture therein, and the pace of structural transformation in Africa over the last 50 years. The evolution has involved shifting roles of industry versus agriculture and that of government and the public sector versus markets and the private sector. Government intervention in favor of industrialization in the 1960s and 1970s resulted in the neglect of agriculture, poor growth performance, and a productivity-reducing structural transformation, characterized by an increasing concentration of low productivity labor in the informal service sector. The chapter suggests a move away from the dual economy to a three-dimensional model that pays greater attention to the large informal segment of the service sector. A successful transformation will require accelerated agricultural productivity growth, a modernized informal service sector, and effective industrialization strategies, with balanced roles for government, markets, and the private sector, all supported by country-led, evidence-based strategies.
Applying Experiments to Land Economics: Public Information and Auction Efficiency in Ecosystem Service Markets
Kent D. Messer, Joshua M. Duke, and Lori Lynch
The use of laboratory and field economic experiments to explore issues in land economics is increasingly popular as researchers identify problems that cannot be adequately addressed by traditional economic theory or empirical techniques. This article reviews this area’s growing literature as well as offers a framework to understand the trade-offs between issues of experimental control, problem context, and representativeness of participants. The key experiment design elements related to land economics are discussed. These elements are then illustrated by a study of the efficiency of reverse auctions for land conservation given different structures of private and public information. The study results suggest that different levels of public information affect sellers’ bidding behavior as well as competitiveness. Overbidding and too little market competition leads to significant loss of efficiency. These results have implications to how to design ecosystem service market cost effectively.
Edwin S. Mills
This chapter examines the functions of and prospects for large metropolitan areas (MAs) in the United States. It argues that the high cost of transporting people and goods is a necessary, but not sufficient condition for MAs. Economies of scale and scope and the technical ability to substitute structures for land provide cost advantages to firms located in MAs. The factors that limit the sizes of the largest MAs include the size and geography of the country, the limited demand for commodities and services produced in the MA, congestion and pollution, and social issues such as crime, homelessness, poverty, illegitimacy, racial tensions, and other forms of alienation that increase with MA size. Because of these limiting factors, the largest US MAs are expected to grow at slower rates than the US population in coming decades, whereas suburbs will continue to experience rapid growth.
Elena G. Irwin and Douglas H. Wrenn
This chapter provides a targeted review and assessment of current empirical methods most commonly used in economics to model spatially explicit land use and land use change. Empirical models are broadly defined as those that use data on land use and the underlying demand and supply processes to specify model parameters in some way. Four main types of modeling methods are considered: reduced-form econometric, structural econometric, spatial equilibrium simulation, and agent-based simulation. Key strengths and weaknesses of each method are discussed, and the applicability of each method for answering various research questions, including policy scenarios, is illustrated with a few recent examples from the literature. The chapter concludes with a discussion of potential complementarities among these various approaches and several critical research gaps.
Ottmar Edenhofer, Christian Flachsland, Michael Jakob, and Kai Lessmann
This chapter analyzes global climate policy as the problem of transforming governance of the atmosphere from an open-access into a global commons regime. This involves several challenges. First, setting an atmospheric stabilization goal requires balancing risks of climate change and risks of mitigation. Second, limiting the atmospheric disposal space for carbon devalues fossil resources and creates a novel climate rent, thus raising distributional issues. Third, policy instrument choice needs to consider the supply side dynamics of global fossil resource markets. Fourth, global climate policy entails strong free-riding incentives. The article reviews incentives for unilateral action and policy instruments as well as alternative conceptualizations of the emissions game that may somewhat alleviate this collective action problem. Finally, the literature on fiscal federalism and fiscal decentralization is considered, promising novel perspectives on designing an efficient decentralized governance regime of the atmospheric commons.
Stéphan Marette and Jutta Roosen
This article traces consumers' reluctance toward new technologies in the food domain and the nature of controversies. It argues that there are economic considerations in discussion of public policy on controversies. This article seeks to address the issues of controversy, the market concerns by such problems, and the reasons that controversies have become so prominent in many food markets. It further clarifies how to approach the question of an optimal policy by studying when a regulator should promote labels compared to other tools such as standards or a ban. This article presents some of the main contributions in both the empirical and theoretical literature, so as to provide economists or policymakers with resources and help to inform their decisions. It then discusses methods of quantifying the welfare impact of a ban or label on the controversial good. It concludes with a discussion of the implications for public policy.