Three Essays in Natural Resource Economics

Abstract

This dissertation uses three different approaches to answer three different questions in the field of natural resource economics. The ability to match the right method to an interesting question is the reason I pursued a PhD in applied economics in the first place and is on display here. Chapter One asks how society should price a scarce resource, water, in the face of efficiency and equity principles. We examine the 2015 pricing structures of 35 U.S. cities to see how they align with the outlined theoretical aims of utility pricing. We would expect water prices to be higher in water-stressed regions following classical demand theory. However, we find the opposite pattern in the data: cities facing greater water scarcity tend to have lower water prices. In addition, to address equity and ensure that all households have access to water, we would expect low prices on “essential water use” with higher prices for additional water beyond essential use. However, we find that the majority of cities have higher per unit water prices (average price) for low use than for high use. Current pricing structures for public utilities in the US are not equipped to handle dry conditions while supplying water equitably. Chapter Two examines the paradigm of public conservation characterized by yearly budget cycles and uncertain land availability. I incorporate these characteristics into a stochastic dynamic programming problem and numerically solve for an optimal strategy for public conservation decisions. Results from the model highlight the significant effects of turnover in land markets have on decisions of when to purchase land, both across a planning horizon and within a budget cycle. Using simulations, I examine how these heuristics perform when applied to conservation of duck habitat in the prairie pothole region of the United States. Results from this application show simple cost-benefit heuristics are effective and point to several ways to improve the effectiveness of public conservation including increasing public private partnerships, budget flexibility and recruitment of landowners Chapter Three looks at the effects of large-scale land use policy on the health of local populations in Cambodia. Since 1996, the government of Cambodia has leased around 65 percent of its arable land to private companies leading to widespread land use changes. These environmental changes along with the resulting socioeconomic shifts have the potential to impact health conditions of local populations. We use geocoded data from the Cambodia Socio-Economic Surveys to estimate localized effects of large-scale land use changes on the health of local populations using a spatial difference-in-differences empirical strategy. We find that the prevalence of fever, a common proxy for malaria, decreases on land leased out under the policy but increases substantially within 10 kilometers of its borders. We present evidence suggesting a main mechanism for these effects is the variable deforestation. We conclude policy makers should consider health impacts alongside other economic concerns when formulating ecosystem-altering land policy.