Agricultural & Resource Economics Theses and Dissertations
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Item ESSAYS ON THE DESIGN AND EVALUATION OF PAYMENTS FOR ECOSYSTEM SERVICES PROGRAMS(2024) Kim, Youngho; Lichtenberg, Erik; Newburn, David; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Nature-based solutions for climate change mitigation and adaptation emphasize the restoration of natural infrastructure and the adoption of conservation practices in agriculture. Payment for ecosystem services (PES) programs play a key role in these efforts by offering financial incentives to farmers and landowners who adopt land use or management activities that provide environmental amenities and services for society. This dissertation consists of three chapters that examine the optimal design of PES programs and evaluate their performance in the context of climate change and environmental protection. The first chapter investigates whether PES programs contribute to climate change adaptation by reducing economic losses from extreme weather events. I evaluate the cost-effectiveness of the Conservation Reserve Enhancement Program (CREP) in the United States in mitigating flooded crop losses through the restoration of riparian buffers and wetlands. By leveraging variation in the timing of program introduction across counties in the Mississippi River Basin, I find that the introduction of CREP reduced both the number of flooded acres and the extent of damage on those acres. CREP also generated financial spillover effects on the federal crop insurance program, reducing indemnity payouts that would have otherwise been allocated to insured farmers. This study enhances our understanding of how PES programs promote sustainable agriculture and facilitate nature-based solutions for climate change adaptation. The second chapter examines the cost-effective structure of payments and penalties in PES programs, in collaboration with Erik Lichtenberg and David Newburn. The sustainability of ecosystem services programs is contingent on landowners’ compliance with the signed contracts after their initial participation. However, premature contract terminations are not uncommon, particularly when unexpected increases in crop prices lead to the removal of established conservation cover on agricultural land. In such cases, PES programs typically require participants to repay all payments received up to the date of contract termination (e.g., those in the US, the EU, Costa Rica, Mexico, Australia, and many other countries). This standard penalty structure is inefficient because it directly couples penalties with payments, increasing monotonically during the contract period. This study is the first to derive the optimal penalty structure that equals net environmental benefits for the remaining contract period, which decouples penalties from payments. A numerical policy simulation using integrated assessment models shows that the U.S. federal PES programs can substantially increase the environmental benefits by restructuring the current standard penalty. Importantly, the optimal penalty tends to decrease gradually during the contract period, providing credit to farmers for the ecosystem services generated prior to the contract termination. This finding has broad implications for restructuring PES programs in the U.S. and globally, and the study has been published in the Journal of Environmental Economics and Management. The third chapter examines the influence of U.S. federal agricultural conservation programs on the performance of emissions trading programs in promoting afforestation activities on agricultural land, in collaboration with Erik Lichtenberg, David Newburn, Haoluan Wang, and Derek Wietelman. Emissions trading programs, which pay for performance, have been advocated as flexible and efficient tools for achieving pollution reduction goals when evaluated in isolation. However, these programs often operate within a policy landscape dominated by conservation subsidy programs that pay for effort. We find that current federal conservation subsidies are so generous that they significantly crowd out water trading programs when both are in competition, although water trading programs would be effective in isolation. In addition, current carbon market payments for offsets are insufficient to make emissions trading programs more attractive compared to longstanding agricultural conservation subsidy programs. While prior studies have attributed low farmer participation in emissions trading programs to transaction costs and market uncertainty, our analysis suggests that even if these impediments are removed, competition with existing pay-for-effort programs would remain a significant barrier to expansion of emissions trading among agricultural producers. Therefore, the attractiveness and effectiveness of emissions trading programs for afforestation depend heavily on the presence and generosity of longstanding federal agricultural conservation subsidies.Item POLICY IMPACTS FOR DEVELOPMENT: EXAMPLES FROM A MARRIAGE LAW AND A LAND REFORM(2024) Chen, Ying; Battistin, Erich; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This abstract outlines the chapters that form my doctoral dissertation. The first two chapters analyze the impacts of the 1974 Age-of-Marriage law in Indonesia, which aimed to curb child marriage.In the first chapter, I study the effectiveness of age-of-marriage laws. I discuss how age-of-marriage restrictions delay marriages and also affect the marriage market equilibrium, including not only when people marry but also who they marry. I build a theoretical model and illustrate graphically what happens when a law abruptly shifts the supply of marriageable brides and grooms. My model predicts that the age-of-marriage laws are expected to postpone first marriages universally. However, the extent of their impact on the marriage market varies depending on the strength of age-related preferences. In cases where individuals strongly favor a specific age gap between spouses, no marriage market effects are anticipated. Conversely, under weaker age-related preferences, the law alters matching in the marriage market and can affect bride prices, age gaps, or marriage rates. I then test some of those predictions with regression discontinuity estimates using birth cohort as the running variable. Using a large nationally-representative dataset, I estimate impacts of the Indonesian Law on age of marriage and probability of underage marriage for both women and men. In addition, I examine marriage-market effects by estimating impacts on the age gap between spouses as well as spouse education. My estimations based on large survey datasets support the notion that the marriage law delayed marriages and prevented under-age marriages, and also altered matching patterns, at least in the short run. Because the estimation in an RD design is complicated by the misreporting of birth dates, I deploy a range of robustness checks to bolster my findings. Though some of the robustness checks raise important caveats, my overall findings still suggest the law effectively delays marriage and alters matching in the marriage market. The second chapter further explores the effects of delaying marriage on life outcomes. I continue to rely on Indonesia’s Age-of-Marriage law and the same nationally representative dataset. I leverage a fuzzy regression discontinuity design to explore whether the law further brought about other commonly expected desirable outcomes of delayed marriage, such as higher education attainment, employment participation, health, wealth, and more. My results show that the law had a strong impact on girls education. It led to significant increases in all completion rates for girls, from primary school to bachelor degrees. This is consistent with some existing studies finding that delayed marriage can prevent girls from dropping out of school. I do not find similar impacts for men, for whom the marriageable age is 19. My results further do not suggest strong impacts on employment, but I significant positive effects on access to banking and communications, as well as health insurance. Echoing results from Chapter 1, I find strong impacts on spouse outcomes, suggesting that women who delayed their wedding married more educated and more successful men. The third chapter examines the land rental market effects of increased tenure security in the context of China’s land titling reform. Between 2009 and 2018, the Chinese government introduced a nationwide reform to register land titles for rural individual households in over 600,000 villages. To estimate the causal effect of the land reform, I leverage differences across villages induced by a pilot project of the reform conducted between 2009 and 2013. Estimates suggest that registering land titles for individual households led to a substantial increase in their participation in farmland rental markets, and allowed a shift towards non-kin tenants with a higher willingness to pay.Item Essays on Political Economy of Development in Latin America(2024) Angulo Santacruz, Juan Carlos; Battistin, Erich; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation is composed of three applied economics essays in the intersection of development economics and political economy. The first provides an economic explanation to the increase in the intensity of conflict. The second focuses on the effects of presence of illegal activities on educational outcomes. The third analyzes the effect of mass migration on voting behavior and political preferences. Chapter 1 studies how crime may be an unintended consequence of local development. The surge in global demand for Mexican avocados, particularly from the United States, has led to increased production and revenue in avocado-producing municipalities of Mexico. I show that these external changes in avocado global consumption patterns have influenced conflict levels in Mexico. Combining geographical variations in avocado cultivation suitability and fluctuations in avocado demand over time, I find a notable rise in homicides among agricultural workers in municipalities that are well-suited for avocado production. I demonstrate that this rise in homicides is not explained by the increased presence of drug cartels but rather heightened competition between cartels for resources in municipalities where avocados are produced. These findings suggest that cartels vie for territorial control, diversifying their income sources, including the avocado industry, in response to their relatively limited influence over drug markets and routes. In Chapter 2, I turn my attention to the production of illegal crops and how it affects schooling decisions. I focus on the case of Colombian coca leaves, the main input to produce cocaine. The country's main strategy to eradicate coca crops was the fumigation of herbicide until 2015, when the practice was banned. I exploit a plausible exogenous variation in the probability of being sprayed and the temporal effects of the fumigation campaigns as an instrument for the presence of coca fields. This temporal variation along with the cross-sectional variation of the spraying campaigns lead to an instrumental variable difference-in-differences. I use data on coca presence, eradication missions, and school outcomes at the municipal level from 2012 to 2018 to test whether a change in the presence of coca crops has an effect on schooling decisions. I show that my setting does not meet all the assumptions of the traditional difference-in-differences strategy but it fits those of Fuzzy Difference-in-Differences. My empirical findings suggest that an increase in the area cultivated with coca crops increases the high-school dropout rate and it has no effect on the enrollment rate. I rule out the possibility that coca presence crowds out other legal crops. Taken together, these results suggest that high school-age individuals are leaving school to work on coca related activities. In Chapter 3, I revisit the question on whether political preferences of voters are molded by the presence of migrants. I exploit the unanticipated inflow to Colombia of Venezuelans fleeing their home country's political crisis in 2016 and the onset of economic collapse. I compare the results of the 2018 presidential campaign in Colombia across municipalities with similar trends in electoral outcomes between 2002 and 2014 but different presence of Venezuelan migrants on the verge of the 2018 campaign. To address the spatial sorting of migrants across these municipalities, I construct an instrumental variable based on the distance from the closest ports of entry. I find that an increase in the presence of migrants in the municipality yielded a polarized voting behavior. I show that these effects are explained by an increase in the electoral turnout, and that the fondness of voters for Colombia's 2016 Peace Agreement Plebiscite was an important determinant of their behavior, which has been overlooked in past empirical work.Item Fifty Shades of Green - Essays on Eco-friendly Consumption, Public Policy, and Income Inequality(2023) Gutiérrez Mendieta, Aldo; Uler, Neslihan; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation offers a thorough examination of the impact of income inequality on environmental quality, with particular attention to the obstacles encountered by low-income individuals and families in adopting sustainable and environmentally friendly consumption practices. Through the development of a general theoretical model, I provide a novel approach on understanding the dynamics of this relationship. By examining various income inequality scenarios, I assess their effects on environmental quality. Based on these findings, I propose a policy recommendation that addresses both income inequality and environmental concerns. Additionally, I propose an innovative laboratory experiment to empirically validate the theoretical predictions of the general model.In Chapter 1 I present a brief introduction emphasizing the significance of examining the impact of income inequality on the environment. he importance of exploring the individual trade-offs associated with consuming environmentally friendly goods (referred to as 'green goods'), which are more expensive, compared to their environmentally harmful counterparts (referred to as 'brown goods'), which are cheaper to buy. Building upon this framework of green and brown goods, I introduce a general model in Chapter 2 to comprehend individual behavior and investigate the impact of income inequality on environmental quality. This theoretical model offers insights into why income inequality can lead to improved, worsened, or neutral outcomes for the environment, which provides an explanation for the mixed empirical evidence found in previous studies. In Chapter 3, I propose a solution to address the issues of income inequality and the externality generated by the consumption of brown goods simultaneously. I propose the implementation of a permit market in which a regulatory agency issues a limited number of permits to cap the total demand for brown goods, thereby preventing environmental quality from falling below a predetermined threshold. Consumers have the opportunity to trade these permits, enabling income transfers from buyers to sellers and ultimately reducing income inequality. Finally, in Chapter 4 I present the design and analysis of a novel laboratory experiment aimed at empirically testing the theoretical predictions derived from the model introduced in Chapter 2. The experimental results reveal a positive effect of income inequality on environmental quality across all treatments, contradicting the predicted negative effect in specific scenarios. To account for these deviations, I augment the theoretical model by integrating two behavioral motivations, which effectively elucidate the observed behavior. These extensions not only contribute to a deeper understanding of the empirical findings but also offer promising prospects for further research exploration.Item ESSAYS ON CLIMATE ADAPTATION AND ENVIRONMENTAL VALUATION(2022) Wang, Haoluan; Lichtenberg, Erik; Newburn, David A.; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Risk is an important component of the decision-making process. Often time, risk assessment is associated with either space or time. How agents perceive risk and how they respond to risk can have significant policy implications, especially when government programs are designed to either incentivize the provision of environmental amenities or reduce the production of environmental disamenities. This dissertation features three chapters that examine the role of risk, time, and space in evaluating environmental disamenities and amenities in the context of climate adaptation and ecosystem goods and services. The first chapter studies the spillover effects of levee building in response to rising flood risks in the U.S. Mississippi. Using newly digitized data on levee locations and elevations with the Great Mississippi Flood of 2011 as a natural experiment, I show that a 1% increase in the upstream levee elevation increased the downstream levee elevation by 0.7%. A back-of-the-envelope calculation suggests the external costs due to upstream levee building are at least $0.2 billion, reducing the net benefits of heightened levees by 55%. The results highlight the importance of regional coordination to manage large-scale natural disasters while mitigating inter-jurisdictional spillovers. The second chapter uses a discrete choice experiment implemented in a farmer survey to elicit landowners’ willingness to enroll in long-term payments for ecosystem services programs in Maryland. We address the issue of serial non-participation (SNP) when landowners always choose the status quo option and examine the role of time and risk preferences in landowners’ enrollment decisions. We find that ceiling on program participation is evident when SNP is accounted for, pointing to an inherent limitation in voluntary programs. Failing to account for SNP can also lead to quantitatively different welfare measures. Landowners are responsive to program payments with low discount rates consistent with market interest rates. Risk-averse landowners are less likely to enroll in programs, suggesting that they perceive participation to increase income risk. The third chapter proposes a novel extension of existing semi-parametric approaches to examine spatial patterns of willingness to pay (WTP) and status quo effects, including tests for global spatial autocorrelation, spatial interpolation techniques, and local hotspot analysis. We incorporate the statistical precision of WTP values into the spatial analyses using a two-step methodology and demonstrate this method using data from a stated preference survey that elicited values for improvements in water quality in the Chesapeake Bay and lakes in the surrounding watershed. Our proposed methodology offers a flexible way to identify potential spatial patterns of welfare impacts and facilitates more accurate benefit-cost and distributional analyses.Item INTENDED AND UNINTENDED IMPACTS OF GOVERNMENT PROGRAMS IN AGRICULTURE AND EDUCATION(2022) Castro Zarzur, Rosa; Leonard, Kenneth; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Agriculture and education are often considered crucial programmatic areas for governmentsaround the globe. In their search for economic growth and social well-being, governments across the developing world implement policies aimed at enhancing human capital formation and increasing agricultural productivity. In this dissertation I study the intended and unintended impacts of three types of government programs commonly used to improve outcomes in agriculture and education. In countries where land was distributed to collectives or groups rather than to individuals,concerns about how collective ownership may hinder agricultural productivity led to a ”second wave” of land reforms . In my first chapter, I study a land tenure transition from collective to individual land rights, and present evidence on the impacts of the Philippine parcelization program. Contrary to its objective, the implementation of this transitional stage has increased tenure insecurity, albeit without affecting agricultural productivity for most farmers in the short term. In turn, higher tenure insecurity has prompted land leases and a reallocation of labor to the non-farm sector. These unintended effects are likely due to a nontransparent and lengthy implementation process stemming from governmental capacity constraints. My second and third chapters are on education. Teacher quality is one of the most relevantfactors influencing student learning and affecting human capital formation. Attracting the best candidates to the teaching profession has become central to improving education systems around the world. In my second chapter, I assess the effectiveness of an ability-based scholarship on attracting top-performing students into teaching majors. My third chapter is joint work with Miguel Sarzosa and Ricardo Espinoza. We studyhow free college, a policy that has been gaining momentum in Latin America, affects self-selection into teaching majors. We find that free college decreased the relative returns to pursuing a teaching career, making it substantially less popular among relatively poor high-performing students who now self-select into programs with higher returns. We also find that the reform reduced the academic qualifications of the pool of students entering teaching programs, which can negatively affect long-term teacher quality.Item ESSAYS ON EDUCATION INVESTMENT DECISIONS(2022) Gan, Tianqi; Cai, Jing; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation focuses on the economics of education in developing countries with a particular focus on parental educational investment decisions in China. In Chapter 1, I explore how parents' belief affect their investments in children's education using a randomized field experiment with parents of high school students in China. I document two types of information frictions that result in systematic biases in parents' beliefs about children's ability: overconfidence in future performance and underestimating college admission requirements. I then introduce two interventions to correct parents' belief biases. In the first intervention, I use machine-learning techniques to generate predictions on children's future academic performance and distribute them to randomly selected parents. In the second intervention, I give randomly selected parents a report that lists the feasible colleges corresponding to their children's current academic performance. I find that both interventions lead to dramatic reductions in belief biases. In addition, parents report higher levels of monetary investments in children's education, which significantly improved children's academic performance. I also find significant non-linearity in the impacts of ability belief on parental educational investments around their aspirations. In Chapter 2, I investigate the impacts of peer effects on parental educational investment decisions. Using a randomized experiment with 3379 parents of high-school students in China, I identify two channels of social influence in parents' decisions on children's educational investments: parents adjust their decisions based on other parents' behaviors because they learn from other parents' decisions ("social learning") or because their children are facing competition from peers ("competition externality"). I find that both channels have statistically significant effects on parents' investment decisions and increase their willingness to buy an educational service by over 20%. Although the average effects of the two channels are not statistically different, the main channels of peer effects are heterogeneous by parents' educational background: parents with higher education, higher income, and those who only have one child are more likely to learn from peers' decisions whereas those with lower education, lower-income, and more than one child are mainly incentivized by the competition externality. Chapter 3 provides a theoretical explanation for the empirical findings documented in Chapter 1. I introduce the reference-dependent utility theory into the parental education investment decisions by cooperating parents' aspirations into their utility and assuming parents' utility function is discontinuous at the thresholds of achieving aspirations. The modification generates an interesting non-monotonic correlation between ability and optimal educational investments around the aspirations. When children haven't achieved their aspirations, parental educational investment is substitutive to children's ability - the lower the ability, the higher the investment. In contrast, when the aspirations are already reached, parents' investment becomes complementary to children's ability - the higher the ability, the higher the investment. This model can rationalize the remedial investments behaviors.Item Environmental Federalism: Chinese Governmental Behaviors in Pollution Regulations(2019) Yan, Youpei; Lichtenberg, Erik; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)China's economic growth has come with the cost of environmental deterioration. The economy has faced with many problems in land resource depletion and industrial pollution. I examine two policies that tackle three major environmental aspects on land, water, and air in China. All three chapters share the theme that devolution without enough oversights in environmental policies has lead to unintended consequences in practice, as local officials have their trade-offs to promote local economy and protect environment. The first chapter explores the local government's behavior in a land conservation program, which intends to reduce soil erosion by subsidizing afforestation of low productive farmland on steep slopes. Theoretically, the incentives created by the program combined with insufficient oversight have led to afforestation of highly productive farmland on level ground. With a unique land transition dataset, I show that this unintended land use effect has been substantial. This unexpected displacement of highly productive farmland represents a form of leakage that has not been fully explored in the literature. And it is problematic to a country with limited arable land relative to population size as it can negatively impact national food production targets and self-sufficiency goals. The second chapter investigates water pollution activities under China's Pollution Reduction Mandates. In response to the substantial environmental deterioration, the central government taxes firm emissions and subsidizes abatement technology installation. In theory, devolution to local governments to lower pollution and promote economic growth can create local incentives to allocate subsidies to effectively export pollution. I provide the first evidence of the magnitude of these distortions with unique firm-level pollution panel data and find evidence of water pollution exported to downstream and further away from local residences. A simulation indicates that the distortions created by local jurisdictional control harm the environment substantially: centralized allocation of subsidies could reduce total emissions by 20-30%. The third chapter keeps investigating the inter-jurisdictional pollution externalities on air pollution under the same mandates. It provides a complimentary evidence to show that local governments have incentives to promote spatial spillovers and free-ride on the downwind neighbors.Item MERGER EFFICIENCIES IN THE U.S. BOTTLED WATER INDUSTRY(2019) Zhang, Jun; Olson, Lars; Sweeting, Andrew; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation contributes to the literature concerning horizontal merger efficiencies and non-price competition in merger analysis. It focuses on the U.S. premium bottled water industry, where manufacturers face both price and non-price competitions. Chapter 1 gives an overview of this dissertation and chapter 2 to chapter 4 are three papers that the dissertation features. In chapter 2, I study the market power and marginal cost efficiency that was created following the merger of Coca-Cola and Glaceau in the U.S. premium bottled water market by assuming a vertical relationship between upstream manufactures and downstream retailers. In this framework, bottled water manufacturers are assumed to compete solely in prices and product attributes are exogenous. My supply-side model allows for a merger efficiency on Glaceau products by including an indicator for Glaceau products post-merger in the marginal cost function. With counterfactual simulations based on the demand and supply-side estimates, I show the merger has limited impacts on market power while marginal cost efficiency plays an important role in affecting the equilibrium prices and market shares post-merger. In chapter 3, I develop a conceptual framework by extending the vertical relation in chapter 2 to incorporate multi-dimension non-price competitions. This conceptual framework can be applied to consumer good industries with both price and non-price competitions. In this chapter, I provide a detailed description of model derivations, estimation strategies, and counterfactual simulations. In chapter 4, I apply the framework developed in chapter 3 to the merger of Coca-Cola and Glaceau and explore how horizontal merger efficiencies affect the equilibrium market outcomes considering both price and non-price competitions. To understand the underlying mechanisms that rationalize Glaceau's significant boosts in market shares, product varieties, and advertising expenditures post-merger, I estimate a structural demand and supply model where manufacturers choose wholesale prices, product varieties, and advertising, and I allow for several types of efficiencies on Glaceau. With counterfactual simulations, I show how marginal cost, product variety fixed cost, and advertising fixed cost efficiencies affect equilibrium market outcomes and consumer welfares.Item Essays on the Efficient Management of Water Resources(2019) Rosenberg, Andrew; Olson, Lars J; Newburn, David A; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In the first analysis of this dissertation, I assess the water use savings and cost-effectiveness of the Conservation Reserve Enhancement Program (CREP) in the Upper Arkansas River basin in Kansas, a water rights retirement program aimed at reducing depletion of the High Plains Aquifer. First, I use a fixed effects model with matched samples of farmers to determine the effect of CREP on water use. I find that for every unit of authorized water use retired in CREP, 0.8 units of water are saved per year. Second, I examine how a rights retirement program would perform outside of the policy region and how the existing program design could be improved upon. I estimate a probit regression to determine which factors most influence the probability that a farmer enrolls in CREP. Using the results of the probit regression, I then simulate enrollment decisions outside of the policy region to assess the cost-effectiveness of different incentive designs. I find that programs that pay incentives based on past levels of water extraction save water more cheaply than programs that pay based on acreage retired. I also find that programs such as CREP that offer higher incentive rates to farmers that enroll later are more efficient than programs that never increase rates. In the second analysis, coauthors and I assess the household value for stream restoration, a common approach used by local governments to mitigate the water quality impacts of urban stormwater. We conduct a choice experiment in the Baltimore metro region to examine household willingness to pay (WTP) for stream restoration. We vary the land ownership of restoration locations and the distance from households to streams in hypothetical choice scenarios that include changes in several stream restoration attributes. Our results indicate that household WTP for improvements in stream bank stabilization and nutrient reduction are positive and significant on public and private land across all distances. We find significant heterogeneity in WTP across land ownership and proximity to a stream. This heterogeneity in WTP can be of particular interest to policy makers when making decisions about where, and even how, to restore streams.