Three Essays in Environmental and Renewable Resource Economics
Creators: name: Sakai, Yutaro
Publisher: name: Graduate Studies
Year: 2017
Subjects: Economics

description: The environment and natural resources are fundamental to human life. Clean air is crucial for our health, fossil fuels are the base energy source for the modern economy, and fishery resources are the most important source of protein in many countries. Until the middle of the 20th century, the environment and natural resources were not the main subject of research, as human activities appeared to have negligible effects on them. Since then, however, the consequence of human activities started to manifest themselves. Environmental pollution, climate change, deforestation, and depletion of fishery resources are only a few examples. In effect, we live in an era where the careful management of environment and natural resources has never been more important. A major challenge in environmental and resource management is their lack of property rights. For example, clean air is a public good, which is nonexcludable and nonrival. This means that one's pollution abatement effort benefits everyone in the population, while the cost of the abatement is borne by that individual. Consequently, everyone tries to free-ride on others' abatement efforts, and the resulting abatement effort level and air quality will be less than the socially optimal level. Similarly, many fishery resources are nonexcludable so that anyone can participate in a fishery. Because the cost of fishing increases as the size of the fish stock shrinks, an additional harvest by a new fisherman raises the cost of fishing for other fishermen. Thus, while the profit from harvests is enjoyed by each fisherman, the cost of harvest is shared by everyone in the industry. Consequently, the total harvest will be more than the socially optimal level. In both examples, an action of one individual affects others without market transactions (i.e. agreeing to incur the costs or benefits). This is the concept of externality. A positive externality exists if one's action benefits others---as in the case of abatement---, while a negative externality exists if one's action generates costs to others---as in the case of fishery. In this thesis, I examine the management of fishery resources in Chapter 1 and the management of infectious diseases in Chapters 2 and 3. One may wonder why fishery resources and infectious pathogens are in the same thesis, but a closer look reveals that they share two key features. First, they are both renewable natural resources. Both are a part of the ecosystem, and one reproduces in lakes and oceans while the other reproduces in a host's body. The goal of a fishery resource manager is to maximize the rent from the fishery resource, while the goal of a pathogen resource manager (i.e. public health official) is to minimize the cost from the infectious pathogen. Second, externalities are key in the management of both resources. Infectious diseases transmit from a host to another host without an accompanying market transaction. For many infectious diseases, vaccination exists that reduces the risk of infection. When a person vaccinates, this person bears the cost of vaccination such as money and pain, while everyone in the population benefits via the reduced risk of infection. Thus, everyone tries to free-ride on others’ vaccination decisions, and the vaccination rate will be lower than the social optimal level. This is a classic example of public goods. Therefore, the management of fishery resources and infectious pathogens both center around understanding the nature of externalities and finding the optimal level of resource stocks. My analytical approach to these two types of resource management is also common. I first use reduced form econometrics to examine the overall relationship between key variables. I then use theory to explain the empirical results, and further explore other possible outcomes based on the theory. In the case of fishery resource in Chapter 1, theoretical models already exist in the literature, so I focus primarily on the empirical analysis. Alternatively, I show a new stylized fact about the relationship between income and vaccination rates in Chapter 2. As there is no theory in the literature that is consistent with this result, I construct a new theory in Chapter 3. The combination of theory and empirics is useful in examining the phenomenon of interest and discussing policy implications. In Chapter 1, I investigate the impact of fishery subsidies on resource stocks in 23 OECD countries during 1996-2011. Subsidies are common tools to internalize externalities by aligning private and social costs. They are, however, also used for other political purposes. Thus, whether they have positive or negative consequences is an empirical question. My results show that the effect of subsidies depends on the type of subsidy and the management regime. Within this sample, cost reducing subsidies have no effect on stocks if management is individual quota-based but have negative effects if management uses traditional input/output restrictions. Subsidies for improving fishery management and infrastructure produce beneficial effects on stocks under traditional management, but no effect with individual quota-based management. These results suggest that global efforts to reform fishery subsidies should be carried out in a highly selective manner. In Chapter 2, I present a new stylized fact about the relationship between income and childhood vaccination. It shows vaccination rates first rise but then fall as income increases. This pattern is observed in WHO country-level panel data, and in US county-level panel and individual-level repeated cross-section data. This data pattern suggests that both low and high-income parents are less likely to follow the standard vaccination schedule, and that such behaviour is reflected in the vaccination rate at the population level. I provide several alternative explanations as to why we observe this data pattern, including avoidance measures, medical care, and social segregation. Finally, in Chapter 3, I develops a simple model of vaccination decisions in a population where agents differ in their exogenous income. Agents perceive the risk of infection as independent of their decisions, while it is endogenously determined by the population's vaccination rate. I show that while the monetary cost of vaccination prevents low-income agents from vaccinating, the opportunity cost of illness, interacted with the presence of a substitute for vaccination, can naturally generate non-vaccination at the high-income end. These vaccination decisions at the individual level may in turn generate a rise and fall in the vaccination rate as the population's income rises.