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To protect and restore environmental quality, efficient and effective conservation policies are needed. Designing policies require a sound understanding of the contributions of natural endowments to economic vitality, and the performance and impacts of conservation programs. This dissertation consists of three essays, and addresses several issues relevant to these two issues.
The first paper analyzes the effects of the Conservation Reserve Program (CRP) on prices of farmland and developed land. A theoretical model that integrates the optimal investment model with the optimal bidding behavior model is developed. Based on the theoretical model, an empirical study is conducted to quantify the effects. Results show that the CRP increases farmland prices by $18 to $25 per acre, on national average. The effects are relatively large in the Mountain, Southern Plains, and Northern Plains areas. The CRP also affects developed land prices, but the effects are small. Agricultural returns account for about 40% of farmland prices, and growth premium and option value together account for the remaining 60%. This result has an important policy implication in the design and implementation of long term conservation program.
The second paper evaluates the tradeoffs between efficiency and equity in the case of the CRP. A reallocation mechanism of conservation funds is developed and applied in simulations to estimate the tradeoffs. Results show that a 13% sacrifice in efficiency can improve the equity by 14%. In addition, findings suggest that under the benefit-cost ratio rule, conservation funds should be targeted to purchase resources in the Mountain, Northern and Southern Plains. However, under the equity rule, conservation funds should be shifted from the Mountain and Great Plains to other regions, especially the Corn Belt. Also, Environmental Benefits Index (EBI) rule is found to be not optimal in terms of efficiency. To improve its performance, more weights should be placed on the environmental factors in the calculation of EBI score.
The third paper explores the interaction between households’ location decisions and community characteristics such as natural amenities and public services. To achieve the objective, a theoretical model is developed to analyze the location decisions of households who are affected by natural amenities, public services and other community characteristics. Results show that communities with better natural amenities and public services tend to attract more high income households. In turn, the shares of the low and high income households are negatively and positively associated with the level of public services, respectively. Results provide policy implications in poverty reduction. |
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