Three Essays in Natural Risks and Environmental Policy Analysis

Abstract

This dissertation includes three essays that address economic impacts of natural risks and environmental policy on natural resources and economic development. Chapter 1 examines the impacts of economic and flood risk factors on agricultural land conversion in a coastal area by employing an interval censored survival model. Results suggest that flood and hurricane risks affect conversion timing controlling for exogenous and endogenous economic and demographic factors and for spatial interdependence. Alternative model specifications that include parametric, interval censored, and frailty models show remarkably similar results. The flood risk slows down farmland conversion in high risk areas and the impact is especially pronounced after a major hurricane event. Conversion is more likely in areas where flood risk is small relative to the amenity value of the property. Locational attributes, proxies for farming profitability, and local and national economic indicators have expected signs and magnitudes. These findings should be helpful in land use policy development and design.

Chapter 2 explores how the regional social vulnerability contributes to the distribution of the impacts of Hurricane Katrina across income communities on the Gulf of Mexico. A potential relationship between location-based social vulnerability and post-disaster impacts including estimated damage, migration, and recovered cost in the U.S is explored. Base on this, I develop a regional index of social vulnerability and examine how its various dimensions are related to heterogonous damages from the hurricane. Results show a significantly positive relationship between social vulnerability and post-disaster damage estimates and highlight the importance of spatial attributes of the affected areas. Alternative social indexes are suggested that are more sensitive to the post-damage impacts in the low and median income groups.

Chapter 3 employs the Equilibrium Displacement Models (EDM) to explore the distribution of welfare gains between farmers, fertilizer suppliers, and other sectors that result from a fertilizer subsidy policy that increased the subsidies by 670% since 2004 in China. The Muth model is extended and applied to the Chinese rice industry to estimate the relative incidence and distribution of welfare among different sectors. It is found that the total benefits from the policy are about RMB 7.7 billion yuans. The fertilizer suppliers gain about RMB 51 billion yuans from the favorable policy with mean subsidy incidence 0.8 and capturing about 70% of total surplus. The results suggest that transferring parts of subsidies to the non-fertilizer sectors could be considered an efficient way to redistribute welfare in different sectors.