Three Essays on Applied Environmental Economics.

Abstract

This dissertation studies economic and ecological outcomes of large-scale weather risk and land-use change. Three independent studies are completed all of which apply microeconometric techniques, unique panel datasets, and, in two cases, fine-scale spatial data. Chapter 1 addresses the relationship among government agricultural programs, moral hazard, and land-use adaptation to weather risk. Using fine-scale spatial data, we identify farmers’ cropping pattern adaptation to weather risk, and whether a federal disaster assistance policy shock in 2008 from the Supplemental Revenue Assistance Payments (SURE) program distorts this adaptation. Our results show that farmers’ land-use decisions on corn, grassland, soybeans, and wheat are sensitive to pre-plant precipitation in North Dakota, but not in Iowa. Moreover, the SURE program gives farmers in North Dakota a disincentive to adjust cropping pattern to pre-plant precipitation. Limited adaptation implies substantial losses as climate change will increase the frequency of extreme weather events. Chapter 2 introduces microeconometric techniques into ecological research through its analysis of the effect of land-use change on grassland bird species richness. Using fine-scale weather, land cover, and soil data and dynamic panel data models, the causal impact of large-scale land-use change on grassland bird species richness is identified. Based on the estimation model, our projections show that that under the US biofuel mandate (our baseline scenario), the average grassland bird species richness in 2030 will decrease by 22% from 2013 levels. We also identify potential conservation hotspots by projecting heterogeneous county-level outcomes in a spatially-explicit setting under the baseline scenario. Chapter 3 assesses the economic impacts of extremely low Great Lakes water levels. We apply a difference-in-difference-in-differences estimator to generate causal evidence on the economic impacts of an episode of extremely low levels of Lakes Michigan and Huron in 2000-06. We find no evidence that economic outcomes were sensitive to extremely low lake levels. However, our statistically insignificant estimated results suggest that we cannot rule out substantial economic effects of the extremely low levels in the recreation and tourism sector.