Randall Bluffstone

Poverty, Risk Aversion, and Path Dependence in Low-Income Countries: Experimental Evidence from Ethiopia

In most low-income countries, rural households depend on mixed rain-fed agriculture/livestock production, which is very risky. Due to numerous market failures, there are few ways to shift risks to third parties. The literature has focused on what determines the responses of households in such environments. Of special concern are path dependencies in which households experiencing failure are prone to further failure and potential poverty traps. This paper estimates levels and determinants of risk aversion in the highlands of Ethiopia. We find high risk aversion and evidence that constraints have important impacts on risk-averting behavior with perhaps significant implications for long-term poverty. The results also suggest the possibility of path dependence and offer insights into links between risk aversion and poverty traps. Copyright 2009, Oxford University Press.

Does better common property forest management promote behavioral change? On-farm tree planting in the Bolivian Andes

This paper analyzes behavioral change spurred by better common property forest management (CPFM), with a focus on on-farm tree planting. Results from our theoretical household model suggest that on-farm trees, which provide products that can substitute for those from common forests, should be stimulated by better CPFM systems. We test this finding using data from a household survey conducted in the Bolivian Andes in 2000. We find that better CPFM at its highest level of aggregation is positively correlated with more and higher quality on-farm trees. In terms of less aggregated indices, relatively few variables are significant, though two particularly important aspects of forest property rights – access clarity and the existence of formal penalties for overuse – actually reduce on-farm tree planting. We therefore conclude that in general synergies between individual CPFM components are most critical for behavioral change, but improvement of property rights aspects of CPFM may give counter-intuitive results.

Environmental Taxes in Developing and Transition Economies

This paper presents the theory of environmental taxation with special reference to developing countries (DC) and countries with economies in transition (TC). A review of the literature shows there exist several examples of environmental taxes being used to reduce environmentally harmful behavior. Central and Eastern Europe and the former Soviet Union and China have large-scale systems of pollution taxes and other countries are also experimenting with this type of instrument, particularly to reduce water pollution. Several countries have used taxes on environmentally harmful products, such as transport fuels, to raise revenues and reduce pollution. Challenges are associated with the use of environmental taxes in developing and transition countries, but the evidence suggests that despite shortcomings these instruments are making important contributions to environmental protection and economic efficiency.

Community forests, carbon sequestration and REDD+: evidence from Ethiopia

REDD+ (Reduced Emissions from Deforestation and Forest Degradation, “plus” afforestration) is a tool that supports forest carbon-enhancing approaches in the developing world in order to mitigate and hopefully reverse climate change. A key issue within REDD+ is to appropriately bring in the almost 25% of developing country forests that are effectively controlled by communities. Many authors have discussed the social aspects of appropriateness, but there is limited analysis of the actual carbon sequestration potential of better-managed community controlled forests (CCFs). Drawing on an analytical framework that relies heavily on the common property and social capital literatures, our paper contributes to closing this research gap and sheds light on whether community forest management structures should be given serious consideration as REDD+ partners in the battle to mitigate climate change. Using household and community level data from four regional states in Ethiopia, we examine whether CCFs with design features known to be associated with better management appear to sequester more carbon than community systems with lower levels of these characteristics. The empirical analysis suggests that the quality of local level institutions may be important determinants of carbon sequestration. Developing country CCFs may therefore play a positive role within the context of REDD+ and other carbon sequestration initiatives. However, because of the nature of our data, results should be considered indicative. Better and smarter data combined with innovative techniques are needed to conclusively evaluate linkages between CCFs, carbon sequestration and REDD+.

HOUSING, SPRAWL, AND THE USE OF DEVELOPMENT IMPACT FEES: THE CASE OF THE INLAND EMPIRE

This article is concerned with the economics of excessively large and socially costly suburbanexpansionandattemptstosummarizeandorganizethemaineconomicarguments associated with sprawl due to single-family residential home construction. We also apply standard welfare economics and price policy instruments to the issue of suburban sprawl in order to suggest ways in which economics can participate in and inform the debate over sprawl. The article uses the Inland Empire, which includes the valley regions of San Bernardino and Riverside Counties in Southern California east of Los Angeles, as a case study. (JEL R11, R14, Q24) I. INTRODUCTION This article is concerned with the economics of excessively large and socially costly suburban expansion and attempts to summarize and organize the main economic arguments associated with sprawl due to single-family residential home construction. The topic is of interest not only because the social costsof sprawl may be high but also because what seem like fairly clear economic issues have been at least partially obscured by the debate over sprawl. This has led to obfuscation to the point that wellaccepted economic notions have not been able to fulfill their clarifying potential and standard economic instruments to internalize externalities remain on the sidelines. This article presents some of these confusions and debates for review. We also apply standard welfare economics and price instruments to the issue of suburban sprawl in order to suggest ways in which economics can participate in and inform the debate. The article uses the Inland Empire, which includes the valley regions of San Bernardino and Riverside Counties in Southern California east of Los Angeles, as a case study. TheInlandEmpireisverylarge,withapopulation of about 3.8 million. Indeed, though dwarfed by Los Angeles County if the region were a state, it would be larger than exactly half the U.S. states (California Department of Finance Web site; Husing, 2005). The region is a good one for the purpose because key policy issues related to property rights, housing affordability, and externalities closely associated with housing choices that are of nationwide interest are being debated particularly actively in the region. Part of the reason sprawl and its effects are so much in the forefront in the Inland Empire is that the region has experienced an enormous building boom during the past 10 yr. In 2004, there were

Does collective action sequester carbon ? the case of the Nepal community forestry program

This paper estimate the effects of collective action in Nepal’s community forests on four ecological measures of forest quality. Forest user group collective action is identified through membership in the Nepal Community Forestry Programme, pending membership in the program, and existence of a forest user group whose leaders can identify the year the group was formed. This last, broad category is important, because many community forest user groups outside the program show significant evidence of important collective action. The study finds that presumed open access forests have only 21 to 57 percent of the carbon of forests governed under collective action. In several models, program forests sequester more carbon than communities outside the program. This implies that paying new program groups for carbon sequestration credits under the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Degradation in Developing may be especially appropriate. However, marginal carbon sequestration effects of program participation are smaller and less consistent than those from two broader measures of collective action. The main finding is that within the existing institutional environment, collective action broadly defined has very important, positive, and large effects on carbon stocks and, in some models, on other aspects of forest quality.

Measuring Risk Preferences in Rural Ethiopia

Risk aversion is generally found to decrease in income. Between countries, comparative findings with students suggest that people in poorer countries are more risk tolerant, potentially giving rise to a risk-income paradox. We test the robustness of this finding by measuring the risk preferences of 500 household heads in the highlands of Ethiopia. We find high degrees of risk tolerance, consistent with the evidence obtained for students using the same tasks. The level of risk tolerance is higher than for student samples in most Western and middle-income countries. We also find risk tolerance to increase in income proxies within our sample, thus completing the paradox.

The improved biomass stove saves wood, but how often do people use it ? evidence from a randomized treatment trial in Ethiopia

This paper uses a randomized experimental design and real-time electronic stove use monitors to evaluate the frequency with which villagers use improved biomass-burning Mirt injera cookstoves in rural Ethiopia. Understanding whether, how much, and why improved cookstoves are used is important, because use of the improved stove is a critical determinant of indoor air pollution reductions, and reduced greenhouse gas emissions due to lower fuelwood consumption. Confirming use is, for example, a critical aspect of crediting improved cookstoves’ climate change benefits under the United Nations Reducing Emissions from Deforestation and Forest Degradation Programme. The paper finds that Ethiopian households in the study area do use the Mirt stove on a regular basis, taking into account regional differences in cooking patterns. In general, stove users also use their Mirt stoves more frequently over time. Giving the Mirt stove away for free and supporting community-level user networks are estimated to lead to more use. The study found no evidence, however, that stove recipients use the stoves more if they have to pay for them, a hypothesis that frequently arises in policy arenas and has also been examined in the literature.

Mixing economic and administrative instruments: the case of shrimp aquaculture in Thailand

Economic instruments offer the potential to reach pre-determined environmental goals at a lower aggregate cost than less incentive-based measures, but administrative underpinnings crucial to the effective functioning of economic instruments may be lacking in developing countries. For this reason, pragmatic analysts and policymakers often advocate the use of so-called ‘mixed’ instruments that combine incentive mechanisms with improved administrative arrangements. This paper explores such possibilities with reference to intensive shrimp aquaculture, which dominates shrimp farming and is an important economic sector in Thailand. This activity has been cited as a major contributor to environmental degradation in Thailand and several other countries through destruction of mangrove forests, salinization of land, sludge disposal, and, in particular, water pollution. An analytical model is presented that highlights some of the key opportunities and limitations of mixed instruments applied to shrimp aquaculture. Mixed instruments are then proposed and evaluated.

Livestock and Private Tree Holdings in Rural Ethiopia: The Effects of Collective Action Institutions, Tenure Security and Market Access

Abstract This article uses househld panel data spanning the period 2000–2007 to test hypotheses from the literature that secure land tenure, market access and collective action promote accumulation of private capital assets in rural highland Ethiopia. The three natural capital assets analysed in the article, livestock, eucalyptus trees and non-eucalyptus trees on households’ farm plots, make up virtually 100 per cent of privately held disposable assets. Incomes and capital stocks are extremely low and constant and tree assets are at least as important as livestock. We find that collective action and secure land tenure have strong positive effects on accumulation of livestock and other trees, but not eucalyptus. We also find evidence that market access promotes eucalyptus holdings and that other types of wealth tend to be positively associated with private natural capital stocks.