Three Essays on the Economics of Land Use, Environmental Value, and Public Spending

Abstract

Across the world, public spending on government programs profoundly alters land use, preservation of environmental value, and the wellbeing of rural populations. These essays explore three such programs and derive lessons for improving their targeting. Chapter 1 tests the effect of conservation easement tax incentives on land conservation in Virginia, using a difference-in-difference design around a 2002 tax reform. This finds that the environmental quality distribution of easements is wide and matches the statewide quality distribution of all undeveloped land, suggesting the program has considerable room to improve targeting. Increasing tax incentives attract donations of similar or lower quality, but targeting tax incentives only at high-quality land would substantially increase high-quality acres at a cost of 1.18 low-quality acres per high-quality acre. Chapter 2 investigates the targeting of short-term incentives for long-term behavior change, focusing on the case of the EQIP agricultural incentives program. The model connects the short-term and long-term effects of incentives as products of the immediate adoption costs and long-term repeated costs and benefits of a practice. If populations vary primarily by adoption cost, targeting groups with the greatest short-term effect will also maximize the long-term effect. If populations vary primarily by long-term costs and benefits, the groups with the greatest short-term impact are those for whom the practice is highly unprofitable in the long run, and a program can improve long-term impacts by instead targeting those for whom the practice is slightly profitable in the long run. A discontinuity analysis comparing successful and unsuccessful EQIP applicants shows that EQIP induces significant short-term change. Chapter 3 investigates the behavior of Mongolian livestock markets after severe weather shocks, and the role that a livestock insurance program may play in smoothing shocks. During severe Mongolian winters, livestock sales increase and prices fall as credit-constrained nomadic herders look to make necessary investments to protect their remaining herd. National integration in livestock markets absorbs a significant share of the weather-related shocks, as 40-60% of district price risk is due to national market fluctuations and 20-40% is due to province effects. This paper finds that national mortality strongly drives price variations, and livestock insurance reduces sales during high-mortality periods.