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Wildfires in the U.S. are growing in extent and severity, causing billions of dollars in damage each year. Wildfire policy has increased its focus on integrating fire suppression with risk mitigation through fuel reduction. In this context incentives to elicit management activities that mitigate fire risk are critical, because landowners may not carry out sufficient risk mitigation on their own. We examine the effectiveness and welfare implications of several incentive policies, including two novel approaches not studied in the context of wildfire management: liability rules and voluntary agreements. Our analysis uses a threshold model of public good provision, which allows for each landowner's mitigation choices to depend on the total amount of mitigation in the landscape. Our results suggest that the risk mitigation threshold is critical in determining the effectiveness and welfare effects of different incentive programs. When the threshold is high, only voluntary agreements and cost sharing can increase mitigation effort and welfare. Negligence standards can also be effective and welfare enhancing but only when the mitigation threshold is sufficiently low.

This article develops an analytic framework to analyze the tradeoff between economic efficiency and distributional equity in targeting payments for ecosystem services (PES). It also proposes an empirical procedure to trace out the efficiency-equity frontier, where the program is Pareto optimal in the sense that it cannot be improved upon to achieve either higher efficiency or distributional equity without compromising the other. We apply the procedure to the Conservation Reserve Program (CRP), the largest PES program in U.S. history, to analyze (a) whether it is possible to improve both the efficiency and the distributional equity of the program, and (b) what the choice made by CRP administrators implies about the political-economic balance. Results reveal that (a) CRP administrators forfeited about 9% of efficiency for an 18%–23% improvement in distributional equity, depending on the equity indicator used, in the eighteenth signup of the CRP; (b) reducing the maximum allowable rental rate for all contracts would improve efficiency at the cost of distributional equity; (c) reducing the maximum county enrollment cap would reduce efficiency without generating much improvement in distributional equity; and (d) the CRP targeting criterion could be redesigned to achieve both higher efficiency and higher distributional equity.

Economic development in rural areas affects the natural environment, which in turn affects economic growth—both rural and urban. These shared interests and feedback effects in the natural environment are increasingly recognized as important economic and political issues, and necessitate a new framework for better understanding them. This article asks why such a framework does not exist and why it should be developed. It then presents such a framework by integrating regional, urban, and environmental economic insights. The framework focuses on the interactive location decisions of firms and households and centripetal forces for concentration and centrifugal forces for decentralization. The article captures the economic and environmental consequences of rural‐urban relocation and feedback effects through changes in agglomeration economies, congestion costs, natural and social amenities, and the location of economic opportunities. Results show that some feedback effects reinforce the initial forces, but others weaken them. We present two examples to demonstrate the application of the framework. The first focuses on how agglomeration economies affect the effectiveness of environmental regulation and illustrates the benefits of incorporating regional and urban economic insights into environmental policy analysis. The second example focuses on how conservation policy can create localized amenities that help resource‐rich regions avoid the natural resource curse and illustrates how concepts and perspectives from resource and environmental economics can improve our understanding of regional and rural issues.

This article integrates economic and biophysical models to assess how federal crop revenue insurance programs affect land use, cropping systems, and environmental quality in the U.S. Corn Belt region. The empirical framework includes econometric models that predict land conversion and crop choices at the parcel level based on expectation and variance of crop revenues, land quality, climate conditions, and physical characteristics at each site. The predictions are then combined with site-specific environmental production functions to determine the effect of revenue insurance on nitrate runoff and leaching, soil water and wind erosion, and carbon sequestration. Results suggest that federal crop insurance has, on average, a small effect on conversions of non-cropland to cropland, and somewhat more significant impacts on crop choice and crop rotation. These changes in cropping systems have, on average, small impacts on agricultural pollution.

This article uses the 2007 Farm and Ranch Irrigation Survey database developed by the U.S. Department of Agriculture to assess the impact of water scarcity and climate on irrigation decisions for producers of specialty crops, wheat, and forage crops. We estimate an irrigation management model for major crops in the West Coast (California, Oregon, and Washington), which includes a farm‐level equation of irrigated share and crop‐specific equations of technology adoption and water application rate (orchard/vineyard, vegetable, wheat, alfalfa, hay, and pasture). We find that economic and physical water scarcity, climate, and extreme weather, such as frost, extreme heat, and drought, significantly impact producers’ irrigation decisions. Producers use sprinkler technologies or additional water applications to mitigate risk of crop damage from extreme weather. Water application rates are least responsive to surface water cost or groundwater well depth for producers of orchard/vineyard. Water supply institutions influence producers’ irrigation decisions. Producers who receive water from federal agencies use higher water application rates and are less likely to adopt water‐saving irrigation technologies for some crops. Institutional arrangements, including access to distinct water sources (surface or ground) and whether surface water cost is fee based, also affect the responsiveness of water application rates to changes in surface water cost. The analysis provides valuable information about how producers in irrigated agricultural production systems would respond and adapt to water pricing policies and climate change.

The fragmentation of wildlife habitat has long been recognized as a principal threat to terrestrial biodiversity. In this paper, we develop a theoretical model to analyze the spatial targeting of incentives for the restoration of forested landscapes when land quality is spatially heterogeneous and wildlife habitat can be enhanced by reducing fragmentation. We consider a regulator who uses subsidies to encourage the conversion of private agricultural land to forest on a pre-defined set of landscapes. The regulator can observe land-use choices, but not the opportunity costs on individual land parcels. The important insight to emerge from the theoretical analysis is that solutions at or near corners are a strong possibility—on each landscape, either none or all of the agricultural land should be converted to forest. Corner solutions are directly linked to the spatial process determining habitat benefits. To verify the theoretical insight, we present a simulation of the effects of incentive-based policies on the spatial distribution of forests in South Carolina. The empirical methodology integrates an econometric model of land-use change with GIS-based landscape simulations. The empirical findings strongly support our conjecture regarding corner solutions, and the optimal targeting policy is shown to produce substantial welfare gains over a spatially-uniform incentive.

This article examines the causes of spatial disparities in economic development in the United States. A theoretical model is developed to analyze the location decisions of firms and households. An empirical model is estimated to quantify the contribution of alternative factors to spatial variations in wage, employment density, housing price, and land development density. Results suggest that remoteness is a primary cause of spatial disparities in economic development, while natural amenities are a major determinant of housing prices. Despite the dominant role of geography, public investments in infrastructure and human capital development could contribute to economic development in remote areas. Copyright 2008, Oxford University Press.

A spatially explicit model of the optimal timing and location of land development is presented that incorporates dynamic interactions between land development and water quality. Ignoring two-way interactions leads to a lower level of water quality, more development, and lower social welfare. The optimal pace and pattern of development can be achieved through the assessment of an impact fee that internalizes pollution damages and irreversibility costs. Our results demonstrate the importance of accounting for the spatial dimension of land use, the interdependence between land use and environmental quality, and development irreversibility in models of urbanization and amenity-driven growth. Copyright 2008, Oxford University Press.

Land use change is the most pervasive force driving the degradation of watershed ecosystems. This article combines an econometric model of land use choice with models of watershed health indicators to examine the effects of land use policies on watershed ecosystems through their effect on land use. Our results suggest that incentive-based land use policies and property acquisition programs can have relatively large positive impacts on watershed health, while policies that change the returns to land use are less effective. The results suggest that there is potential for targeting these policies because their impacts vary across watersheds with different land use mixes. Copyright 2008, Oxford University Press.

This article examines the allocative efficiency of water quality management activities to protect endangered salmonid species in a heterogeneous watershed in the Pacific Northwest. Using an integrated hydrological, biological, and economic modeling framework, the relative efficiency of alternative policy targets such as temperature reductions and enhanced fish populations is investigated. Results indicate that the heterogeneous nature of riparian conditions and stream morphology influence the choice of management activities. Localized effects of management efforts on temperature are important to achieve small temperature reductions. However, as the desired magnitude of temperature reductions increases, the cumulative (longitudinal) effects become more important, and management efforts in more distant reaches are more efficient than efforts nearer the point of monitoring. Finally, if the underlying objective is to increase fish populations, targeting conservation efforts based on physical criteria such as water temperatures or other total maximum daily load regulations may lead to substantial inefficiencies. Copyright 2006, Oxford University Press.

The growth in conservation programs has created a need for modeling frameworks capable of measuring microlevel behavioral responses and macrolevel landscape changes. This paper presents an empirical model that predicts farmers' production practices and the resulting levels of agricultural runoffs at more than 42,000 agricultural sites in the upper-Mississippi river basin under alternative conservation policies. Results suggest that payments for conservation tillage and crop rotations increase the use of these conservation practices. However, the acreage response is inelastic and the programs are not likely to be cost effective on their own for addressing hypoxia problem in the Gulf of Mexico. Copyright 2004, Oxford University Press.

This article presents a polychotomous choice-selectivity model to estimate the interactions among urbanization, land use regulations, and public finance in five western states (California, Idaho, Nevada, Oregon, and Washington). Land use regulations in these five states reduced the total developed area by an estimated 12.2% from 1982 to 1992, but increased housing prices between 1.3% and 4.7%, depending on the intensity of land use regulations in a county. Land use regulations also reduced public expenditure and property tax in the long run by 5.6% and 8.4%, respectively, but increased public expenditure and property tax in the short run by 9.8% and 12.6%. Local land use policies have been examined in a number of studies (e.g., Epple, Romer, and Filmore; Henderson; Levine; McDonald and McMillen; Phillips and Goodstein). However, little empirical evidence is available on which factors motivate adoption of land use regulations, nor has there been much systematic analysis of the impact of land use regulations on land development and public finance. In this article we present an empirical model to evaluate quantitatively the interactions among urbanization, land use regulations, and public finance in five western states of the United States (Oregon, California, Idaho, Nevada, and Washington). We provide estimates of both the extent to which the rate of development affects the demand for more restrictive land use regulations, as well as the subsequent impact of those regulations on land development, housing prices, public expenditure, and property tax. Because local political processes determine land use regulations, treating regulations as exogenous may cause a selection bias when analyzing their effect on development (Pogodzinski and Sass). The endogenous nature of zoning regulation was first raised by

Each year, billions of dollars of public funds are expended to purchase conservation easements on farmland. One unintended impact of these programs is that they may bring non-cropland into crop production. Such a slippage effect can be caused by increased output prices and by substitution effects. This article shows that for each one hundred acres of cropland retired under the Conservation Reserve Program (CRP) in the central United States, twenty acres of non-cropland were converted to cropland, offsetting 9% and 14% of CRP water and wind erosion reduction benefits, respectively. Implications of these results for the design of conservation programs are discussed. Copyright 2000, Oxford University Press.

A major problem with some conservation programs is that they ignore potential cumulative (threshold) effects in environmental quality management. The objective of this study is to investigate the importance of cumulative effects in the targeting of conservation efforts. The empirical focus is on habitat investments to protect an important anadromous fish species in the Pacific Northwest, steelhead trout. Results of the analysis point to a substantial cumulative effect in the relationship between water quality and abundance in this fishery, which affects the efficiency of specific habitat investments. Copyright 2000, Oxford University Press.

This article derives the condition under which agricultural chemical producers' desire to under-produce, associated with market power, exactly offsets the tendency to overproduce, due to their failure to consider externality costs of agricultural chemicals. This condition is satisfied when the price markup in the chemical industries equals the marginal environmental damages caused by chemicals. Our estimates of price markup for nitrogen, phosphate, and pesticides industries indicate that the welfare loss caused by market power is exactly offset by environmental benefits if the marginal pollution costs are, respectively, eight, nine, and twenty-two cents for each dollar's worth of these chemicals. Copyright 1999, Oxford University Press.

The redirection of farm policy in the 1996 farm bill has generated much interest in seeking environmentally friendly and economically viable ways to protect farm income. Agricultural insurance has been suggested as such an instrument. This article estimates the effect of crop insurance on crop mix and the resulting change in chemical use in the Central Nebraska Basin. Providing corn insurance will shift land from hay and pasture to corn, which will increase chemical use at the extensive margin. This extensive-margin effect dominates the effect of crop insurance on the application rate, leading to an increase in total chemical use. Copyright 1999, Oxford University Press.

Farmers' management practices can have a significant effect on agricultural pollution. Past research has analyzed factors influencing adoption of a single management practice. But often adoption decisions about many practices are made simultaneously, which suggests use of a polychotomous-choice model to analyze decisions. Such a model is applied to the choice of alternative management practices on cropland in the Central Nebraska Basin and controlled for self-selection and the interaction between alternative practices. The results of the choice model are used to estimate the economic and environmental effects of adopting alternative combinations of management practices. Copyright 1998, Oxford University Press.

An environmental stewardship program, whereby farmers are paid directly for the environmental goods they provide, is developed by combining the microparameter distribution model with mechanism design principles. The program overcomes the information asymmetry between farmers and governments and accounts for the deadweight losses from distortionary taxes. The characteristics of optimal input and payment schedules of the program are derived. These optimal schedules are determined by the tradeoffs between farming profits, environmental benefits, and deadweight losses from taxes, and are second-best except under restrictive conditions on deadweight losses from taxes and on the marginal product of inputs and marginal pollution costs. Copyright 1996, Oxford University Press.

The problem of targeting CRP purchases to buy environmental amenities under productivity and environmental heterogeneity is considered. Gini coefficients and Lorenz curves are used to measure the effectiveness of spending under alternative targeting criteria. The environmental benefits considered are water erosion, wind erosion, surface water quality, and wildlife habitat. The three alternative targeting criteria examined include purchasing land according to (i) the benefit-to-cost ratio, (ii) the level of benefits, and (iii) the level of cost. Results indicate that the degree of variability and correlation determine the extent to which suboptimal targeting achieves a significant portion of available environmental benefits. Copyright 1996, Oxford University Press.

In this paper we present an empirical framework for quantifying the extensive margin effects of commodity programs and chemical-use taxes on potential groundwater pollution in Wisconsin. The approach emphasizes the role of the joint distribution of crops and site characteristics in determining policy impacts on groundwater contamination. The results indicate that for a given reduction in total polluting acreage an increase in the Acreage Reduction Program rate for corn is well targeted and would reduce high-polluting acreage more than a chemical-use tax or a target price policy in the areas where it might be needed most.