Essays on the Economics of Land Use and Adaptation to Climate Change.

Abstract

Spatial patterns of land use can be explained by traditional concepts in the economic theory of agglomeration, such as natural advantages (climate) and input-output linkages.

Chapter 1 uses a long-differences methodology to study land-use adaptation to observed climate change between 1982-2012 for six broad land categories. The results show that landowners respond in expected ways to temperature and precipitation shocks. The results for cultivated cropland are strongly consistent with previous research on the impact of climate change and weather on U.S. crop yields. Producers are more likely to remain in, or switch into, cultivated cropland when climate changes are favorable to crop yield. They are more likely to switch out of, or not switch into, cultivated cropland with increased exposure to extreme heat or to moderate cooling.

Chapter 2 examines the effect of input-output linkages on spatial crop and rural development patterns using the quasi-experiment of 130 corn ethanol refinery openings in the U.S. Midwest from 2002-2012. A main finding is that the probability of growing corn increases after a plant opening and shows a distance-decay relationship that goes to zero after 45 kilometers. The respective probabilities of growing soybeans, wheat, and grassland show a countervailing effect to corn, decreasing after a plant opening in a distance-decay relationship that, again, goes to zero after 45-50 kilometers. Developed land increases in the buffer adjacent to the plant, providing limited evidence of rural development in response to new refineries.

Chapter 3 examines whether climate-change adaptation is always beneficial when considered in a game theoretic context. We distinguish between climate-change mitigation strategies, which will reduce the scale of adverse effects, and adaptation strategies, which will lessen their impact. We conduct a thorough analysis of the trade-offs and consequences of adaptation investment, detailing the perverse incentives that can exist in strategic environments. Specifically, we derive conditions in which Nash equilibrium payoffs increase in response to reduced abilities or incentives to adapt, which we model using direct constraints, taxes, and shocks to adaptation benefits.