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Environmental Policies in Developing Countries: Individual Decision-Making and The Welfare Implication

XU, SHANG
http://rave.ohiolink.edu/etdc/view?acc_num=osu156337408534068

Abstract Details

2019, Doctor of Philosophy, Ohio State University, Agricultural, Environmental and Developmental Economics.
Balancing economic growth and maintaining environment quality present difficult tradeoffs in developing countries due to extensive industrialization and increasing impacts from climate change. To address these issues, it is imperative that policymakers develop an understanding of economic agents’ behaviors in response to various development and conservation policies. In this dissertation, I focus on studying how individual decision-making is influenced by environmental management and development policies and evaluate the resultant welfare outcomes in three developing contexts: The west-east natural gas transfer project in China, the incidence of natural disasters in Indonesia and forest conservation in Indonesia. The theoretical framework in this dissertation extends well-established decision-making theories from developed countries to a developing context. The empirical analysis of this work provides new insights how individuals affect equilibrium outcomes. The first chapter evaluates the investment in natural gas infrastructure and changes in energy composition and environmental quality in China. We causally identify the impact of providing access to natural gas on emissions of airborne pollutants and shifting fuel consumption in both industrial and residential sectors in China. Our empirical analysis uses the staggered construction of three major natural gas pipelines that are operated by the same state-owned enterprise as a quasi-experiment. We find a significant decline in major air pollutants associated with the construction and operation of new natural gas pipelines. The primary mechanism accounting for the decline in pollution is through a substitution away from coal to natural gas among industrial users. Compared with industrial users, residential response is muted, reflecting the likely higher costs of adoption of this newly-provided energy source. These findings highlight the role of access to new energy in explaining the fuel consumption and environmental patterns that are emerging across the developing world investing as driven by investments in energy infrastructure. The second chapter examines the relationship between the spatial distribution of labor productivity and natural disasters in Indonesia. We develop a dual-sector spatial equilibrium model that incorporates households’ occupation and location choices and recover estimates of changes in labor markets attributable to natural disasters. Estimating the model with micro data, we show the incidence of natural disasters is an important factor driving the observed pattern in labor supply and labor productivity through both income and amenity channels. We find that labor productivity in the off-farm sector is positively affected by natural disasters, likely due to increased labor demand for post-disaster repair, but adversely impacted in the subsistence agriculture sector, which may suggest limited means to manage risks among farmers exposed to negative shocks. Lower returns to subsistence agriculture also lead to a transition of labor supply towards the high-productivity sector and may lead to an overall increase in observed labor productivity. These findings provide one possible explanation for existing findings in the literature that natural disasters in developing contexts have generally low impacts on economic growth. While it is worth noting that, as a negative environmental amenity, natural disasters still cause significant welfare loss to households. Given these competing effects, it is an empirical question whether and to what extent disasters cause changes in the labor market that may offset welfare loss. The third chapter investigates the labor market and household consumption impacts of the implementation of a nationwide forest conservation policy in Indonesia. We adapt the intuition from the theoretical model in chapter two and derive testable predictions about changes in household food and non-food consumption and on-farm and off-farm labor allocation in response to the Indonesian moratorium program, which is designed to restrict industrial encroachment onto primary forests and peatland. We exploit the spatial variation of the enrollment intensity as a natural experiment and show that the program leads to significant poverty consequences. We find that on average households allocate about 7.7% more labor into subsistence agriculture associated with the program, suggesting a significant income loss given the large productivity gap between subsistence agriculture and the off-farm sectors. Correspondingly, households decrease their non-food expenditure by approximately 7.8%. While expenditure on food is not affected, we find per capita intake of protein and fat decrease by 3.5% and 6.3% respectively. As such products are likely obtained through market channels, the decrease likely reflects the lagged development of market infrastructure due to the implementation of the program. These findings highlight the conflicting relationship between natural resource conservation and poverty relief and underline the importance of taking individuals’ adaptive behaviors into consideration with designing conservation policies. In summary, this dissertation provides key insights into the relationships between economic wellbeing and the natural environment. The theory and methods developed in this work are innovative and improve our understanding of individuals responses to environmental changes, especially in developing countries.
ALLEN KLAIBER (Advisor)
DANIELA MITEVA (Advisor)
ABDOUL SAM (Committee Member)
148 p.
Environmental Economics

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Citations

  • XU, S. (2019). Environmental Policies in Developing Countries: Individual Decision-Making and The Welfare Implication [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu156337408534068

    APA Style (7th edition)

  • XU, SHANG. Environmental Policies in Developing Countries: Individual Decision-Making and The Welfare Implication. 2019. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu156337408534068.

    MLA Style (8th edition)

  • XU, SHANG. "Environmental Policies in Developing Countries: Individual Decision-Making and The Welfare Implication." Doctoral dissertation, Ohio State University, 2019. http://rave.ohiolink.edu/etdc/view?acc_num=osu156337408534068

    Chicago Manual of Style (17th edition)

osu156337408534068
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