Dan Marsh

Water resource management in New Zealand: Jobs or algal blooms?

New Zealand faces a choice between environmental improvement and dairy industry profitability and employment, since improved water quality in lakes and rivers may require measures that will reduce net farm profit. Environmental valuation studies often consider preferences for employment but rarely focus specifically on the effect of job losses on respondent preferences for environmental improvement. A choice experiment was used to investigate peoples willingness to pay for water quality improvements in a typical dairy catchment in the Waikato region of New Zealand. It was found that respondents would be willing to pay for water that is safer for swimming with improvements in clarity and ecological health, but are concerned about job losses, even when they do not expect to be directly affected. This may be explained by the concept of sociality, whereby the influence of direct interpersonal interaction on human behaviour, affects choice behaviour. Findings from this study and ongoing research should allow decision makers to consider both the costs and the benefits of different levels of water quality improvements, so allowing policy makers to identify the most cost effective options for achieving any given improvement in water quality.

Analysis of environmental and economic efficiency using a farm population micro-simulation model

New Zealands success in raising agricultural productivity has been accompanied by higher input use, leading to adverse effects on the environment. Until recently, analysis of farm performance has tended to ignore such negative externalities. The current emphasis on environmental issues has led dairy farmers to target improvements in both environmental performance and productivity. Therefore, measuring the environmental performance of farms and integrating this information into farm productivity calculations should assist in making informed policy decisions which promote sustainable development. However, this is a challenging process since conventional environmental efficiency measures are usually based on simple input and output flows but nitrogen discharge is a complex process affected by climate, pasture composition, cow physiology and geophysical variability. Furthermore, the outdoor pastoral nature of New Zealand farming means that it is difficult to control input and output flows, particularly of nitrogen. We present a novel approach to measure the environmental and economic efficiency of farms, using the Overseer nutrient budget model and spatially micro-simulated virtual population data. The empirical analysis is based on dairy farms in the Karapiro catchment, where nitrogen discharge from dairy farming is a major source of nonpoint pollution.

Does New Zealand have an innovation system for biotechnology

While there is a large and growing international literature on economic aspects of biotechnology innovation (e.g. work by Carlsson, McKelvey, Orsenigo, Zucker and Darby) these studies concentrate on the United States and Europe. The New Zealand biotechnology industry may be expected to develop along a different trajectory as a consequence of a markedly different set of initial and framework conditions. This paper presents the results of an ongoing study that aims to fill some of the gaps in our knowledge of innovation processes in New Zealand while using the international literature as a benchmark. The size and structure of modern biotech activity in New Zealand is described and compared to other OECD countries using biotech patent data and results from the New Zealand and Canadian biotechnology surveys. The paper then focuses on factors affecting innovation in biotechnology; framework conditions, government policy R&D funding and the role of networks and other linkages.

Simulation of alternative dairy farm pollution abatement policies

New Zealand dairy farmers face a tradeoff between profit maximisation and environmental performance. The integrated simulation model presented here enables assessment of the economic and environmental impact of dairy farming with a focus on nitrogen pollution at the catchment level. Our approach extends the value of the DairyNZ Whole Farm Model (Beukes et al., 2005) as an environmental policy tool by building and integrating nitrogen discharge functions for specific soil types and topography using a metamodelling technique. A hybrid model is created by merging the merits of differential evolution and non-linear optimisation to expedite policy simulations, in which farm profits and nitrogen discharges obtained from the differential evolution optimisation process are assembled to form a profit-pollution frontier. This frontier is then subject to constrained optimisation based on non-linear optimisation in order to predict producer responses to alternative pollution control policies. We apply this framework to derive marginal abatement costs for heterogeneous farm types and find that abatement costs for intensive farms are lower than for moderate and extensive farming systems. We further conclude that abatement can be achieved more cheaply using a compulsory standard or threshold tax than using a standard emissions tax.

Modelling innovative activity in the New Zealand biotechnology sector

This paper analyses results from an investigation into the determinants of biotechnology innovation in New Zealand using a comprehensive new data set. The theoretical framework is based on a synthesis of hypotheses drawn from four strands of the innovation literature and the empirical work utilises Poisson regression methods. The data provide strong support for the idea that smaller enterprises (whether measured by number of biotech graduates or by biotech expenditure) tend to have a higher innovation rate and is in line with other studies reported in the literature. However, these initial results require further exploration.

Forest Valuation under the New Zealand Emissions Trading Scheme: A Real Options Binomial Tree with Stochastic Carbon and Timber Prices

Under the New Zealand Emissions Trading Scheme, forests planted on or after January 1, 1990, earn carbon credits. These credits have to be repaid when the forest is harvested. This paper analyses the effects of this scheme on the value of bareland on which radiata pine is to be planted. A real options method is developed and applied, assuming stochastic carbon and timber prices. We find that land value increases by about 73%, with the optimal rotation age substantially lengthened. The derived optimal harvest price thresholds are useful in deciding whether to harvest or to wait. (JEL Q23, Q28)

The impact of tobacco policy reforms on smallholder prices in Malawi

Two key questions are addressed in this article. (i) Have Malawis tobacco‐policy reforms led to improvements in the absolute prices that smallholders get? (ii) How do the prices that smallholders receive compare with what the rich estate owners get? Empirical results indicate that the reforms have led to some improvements in both absolute and relative prices that smallholder farmers receive. Major positive changes in the tobacco price‐structure have occurred after removing monopsony and liberalising the market. However, farmers, especially smallholders, are still faced with high transaction and logistics costs that need to be addressed.

Using Microsimulation to Maximise Scarce Survey Data: Applications for Catchment Scale Modelling and Policy Analysis

Microsimulation can be used to extend the use of scarce survey resources by creating simulated populations whose characteristics are close to those of the real population. The technique involves merging detailed survey observations with variables from more extensive data sets in order to create a simulated population. We illustrate how microsimulated data enable analysis of the economic and environmental impact of different policies on a catchment for which detailed farm level data was unavailable. Use of microsimulation for agri-environmental policy analysis is applicable to diverse problems from simulation of nitrogen trading to modelling of agent response to policy shocks. Scale flexibility is easily implemented since data can be aggregated or disaggregated to the preferred scale. Simulated catchment data allows better understanding of the effects of policies on different types of farm and should be extremely valuable to organisations that want to minimise the economic impact of environmental policies.