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Products: UHERO Working Papers

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Optimal Provision and Finance of Ecosystem Services: the Case of Watershed Conservation and Groundwater Management

Payments for ecosystem services should be informed by how both the providing-resource and the downstream resource are managed. We develop an integrated model that jointly optimizes conservation investment in a watershed that recharges a downstream aquifer and groundwater extraction from the aquifer. Volumetric user-fees to finance watershed investment induce inefficient water use, inasmuch as conservation projects actually lower the optimal price of groundwater. We propose a lump-sum conservation surcharge that preserves efficient incentives and fully finances conservation investment. Inasmuch as proper watershed management counteracts the negative effects of water scarcity, it also serves as adaptation to climate change. When recharge is declining, the excess burden of non-optimal watershed management increases.

working paper

 


Why Hasn’t the US Economic Stimulus Been More Effective? The Debate on Tax and Expenditure Multipliers

Recent dissatisfaction with the impact of expenditure stimulus on economic activity in the United States, along with the results of academic research, have once again raised questions about the effectiveness of fiscal stimulus policies and about whether stimulus to a recessionary economy should be in the form of tax cuts or expenditure increases. This paper considers alternative methods for evaluating the impacts of stimulus policy strategies. We discuss conceptual challenges involved in effectiveness measurement, and we review alternative empirical approaches applied in recent studies. We then present our own estimates of policy multipliers based on simulations of the IHS Global Insight model of the US economy. Based on this review and analysis, we address the question of why recent US stimulus programs have not been more effective.

Published: Adams, F.G., Gangnes, B., 2010,  Why Hasn't the US Economic Stimulus Been More Effective? The Debate on Tax and Expenditure Multipliers. World Economics, 11 (4), 111-130.

working paper version


Optimal and Sustainable Groundwater Extraction

With the specter of climate change, groundwater scarcity looms as an increasingly critical issue worldwide. Minimizing the adverse effects of scarcity requires optimal as well as sustainable patterns of groundwater management. We review the many sustainable paths for groundwater extraction from a coastal aquifer and show how to find the particular sustainable path that is optimal. In some cases the optimal path converges to the maximum sustainable yield. For sufficiently convex extraction costs, the extraction path converges to an internal steady state above the level of maximum sustainable yield. We describe the challenges facing groundwater managers faced with multiple aquifers, the prospect of using recycled water, and the interdependence with watershed management. The integrated water management thus described results in less water scarcity and higher total welfare gains from groundwater use. The framework also can be applied to climate- change specifications about the frequency, duration, and intensity of precipitation by comparing before and after optimal management. For the case of South Oahu in Hawaii, the prospect of climate change increases the gains of integrated groundwater management.

working paper


Optimal Management of a Hawaiian Coastal Aquifer with Near-Shore Marine Ecological Interactions

We optimize groundwater management in the presence of marine consequences of submarine groundwater discharge (SGD). Concern for marine biota increases the optimal steady-state head level of the aquifer. The model is discussed in general terms for any coastal groundwater resource where SGD has a positive impact on valuable near-shore resources. Our application focuses of the Kona Coast of Hawai’i, where SGD is being actively studied and where both near-shore ecology and groundwater resources are serious socio-political issues. To incorporate the consequences of water extraction on nearshore resources, we impose a safe minimum standard for the quantity of SGD. Efficient pumping rates fluctuate according to various growth requirements on the keystone marine algae and different assumptions regarding recharge rates. Desalination is required under average recharge conditions and a strict minimum standard, and under low recharge conditions regardless of minimum standards of growth.

working paper


Limits to Growth: Tourism and Regional Labor Migration

The paper provides a methodology for considering the carrying capacity and limits to growth of a labor-constrained mature tourism destination. A computable general equilibrium model is used to examine the impacts of visitor expenditure growth and labor migration on Hawaii's economy. Impacts on regional income, welfare, prices, sector-level output, and gross state product are considered under alternative migration scenarios. Labor market constraints impose limits to growth in real visitor expenditures. Labor market growth with constrained visitor demand generates falling per capita household welfare.  

working paper

 


An Economic Assessment of Biological Control for Miconia calvescens in Hawaii

Biocontrol, the introduction of organisms to control an unwanted species, has been cited as a powerful method to manage the invasive species Miconia calvescens in Hawaii. In addition to ecological advantages, biocontrol is often regarded as less costly than traditional methods despite the large initial investment. Currently, miconia in Hawaii is treated through aerial and manual operations, which cost over $1 million annually. Biocontrol for miconia in Hawaii began in 1997 and the search for more agents continues today. Although biocontrol for miconia has already begun, prior to this study no assessment of its economic justifiability had been done. This research evaluates the present value of net benefits of miconia biocontrol in Hawaii. Cost data were gathered from scientists in charge of biocontrol programs. Benefits were defined as the cost-savings of current control methods. Two different biocontrol programs were modeled: control achieved by a single agent, and control achieved by a suite of agents. In addition, different dispersal rates and efficacies of biocontrol and two release dates were modeled. Because most costs of biocontrol are incurred before the release of a successful agent and the benefits are only realized post-release, each scenario was evaluated over a 50-year time horizon. The results indicate a positive present value of net benefits in all scenarios, ranging from $12.8 million to $36.1 million. Thus, biocontrol for miconia in Hawaii appears to be economically justifiable. This research should enable scientists, economists and policy makers to make informed decisions about the optimal management of Miconia calvescens in Hawaii.

working paper


Spatial Economic Analysis of Early Detection and Rapid Response Strategies for an Invasive Species

Economic impacts from invasive species, conveyed as expected damages to assets from invasion and expected costs of successful prevention and/or removal, may vary significantly across spatially differentiated landscapes. We develop a spatial-dynamic model for optimal early detection and rapid response (EDRR) policies, commonly exploited in the management of potential invaders around the world, and apply it to the case of the Brown treesnake (Boiga irregularis) in Oahu, Hawaii. EDRR consists of search activities beyond the ports of entry, where search (and potentially removal) efforts are targeted toward areas where credible evidence suggests the presence of an invader. EDRR costs are a spatially dependent variable related to the ease or difficulty of searching an area, while damages are assumed to be a population dependent variable. A myopic strategy in which search only occurs when and where current expected net returns are positive is attractive to managers, and, we find, significantly lowers present value losses (by $270m over 30 years). We find further that in the tradeoff between search costs and damages avoided, early and aggressive measures that search some high priority areas beyond points of entry even when current costs of search exceed current damages can save the island more ($295m over 30 years). Extensive or non-targeted search is not advised however.

working paper


Global Production Networks in Electronics and Intra-Asian trade

The growth of East Asia’s intra-regional trade is driven largely by increased component trade within global electronics production networks. Data on both electronics trade and production elucidate a pattern of specialization in which upper- and middle-income countries produce sophisticated components and lower-income countries assemble lower- value-added final goods. There is evidence of increasing sophistication within the electronics sector by the Newly Industrialized Economies and to a lesser extent by ASEAN countries. Despite the marked increase in intra-regional trade, developing East Asian countries remain heavily dependent on developed-country markets. When Western export demand rapidly contracted during the 2008-2009 economic crisis, these specialization patterns led the rapid diffusion of the business cycle shock throughout the East Asian region.

working paper

 


Wither The Economics of Agricultural Development?

In spite of healthy demand for a renaissance in economic policy for agricultural development, the academic supply response is found wanting. The infusion of public economics into the economics of agricultural development, which thrived during the 1970s and 80s, has stagnated due to the lack of foundations in transaction costs, dynamics, and the co-evolution of specialization and governance. Many of the policy ideas found in the World Bank’s, WDR 08, for example, reflect a post-modern tendency to seek and destroy market failures with new mandates and subsidies for farmer cooperatives, microfinance, crop insurance, and land reform. The new development microeconomics favors form over substance and overemphasizes multiple equilibria, trap theories, new market failures, and the new case for social insurance. Empirical research has likewise suffered from the quest for clever instruments and methods instead of informative results that estimate parameters of established theories, distinguish between competing theories, or challenge theory to explain empirical patterns. These latest fads and fancies have distracted economists from the quest for fundamental explanations of development patterns, especially the nature and causes of specialization as an engine of growth. The stage is set for young dynamic scholars to develop new tools of analysis to explain empirical patterns in behavior and organization in developing agriculture and to build the foundations of a public microeconomics of development.

working paper

 


Inclusionary Zoning: Implications for Oahu's Housing Market

This report describes Oahu’s housing market and summarizes results from an analysis of the effect of inclusionary zoning (“IZ”) on this market. Inclusionary Zoning policies have failed in other jurisdictions, and are failing on Oahu. IZ reduces the number of “affordable” housing units and raises prices and reduces the quantity of “market- priced” housing units.

UHERO Project Report


Alternative Policies for US Economic Recovery

Recovery has begun in the United States and global economies. The US recovery is likely to be anemic by historical standards, raising the possibility that additional stimulus may be desirable. The President and Democrats in Congress have called for a “jobs bill,” and the Federal Reserve has demonstrated that it has a flexible toolkit for providing additional liquidity if deemed appropriate. The possible need for such stimulus will come up against the reality of an expanding public debt on the one hand, and inflationary concerns on the other. In this paper, I use simulations of the IHS Global Insight Model to assess the potential impact on the recovery path of alternative macro policies.

working paper

 


Greenhouse Gas Emissions in Hawaii: Household and Visitor Analysis

This paper focuses on petroleum use and greenhouse gas emissions associated with economic activities in Hawai‘i. Data on economic activity, petroleum consumption by type (gasoline, diesel, aviation fuel, residual, propane), and emissions factors are compiled and analyzed. In the baseline year 1997, emissions are estimated to total approximately 23.2 million metric tons of carbon, 181 thousand metric tons of nitrous oxide, and 31 thousand metric tons of methane in terms of carbon-equivalent global warming potential over a 100-year horizon. Air transportation, electricity, and other transportation are the key economic activity responsible for GHG emissions associated with fossil fuel use. More than 22 percent of total emissions are attributed to visitor expenditures. On a per person per annum basis, emission rates generated by visitor demand are estimated to be higher than that of residents by a factor of 4.3 for carbon, 3.2 for methane, and 4.8 for nitrous oxide.

The full publication can be found at: http://www.sciencedirect.com/science/article/pii/S0140988309001133 


The Dog ATE my Economics Homework! Estimates of the Average Effect of Treating Hawaii’s Public High School Students with Economics

Hawaii is one of 27 states that do not require testing of public high school students regarding their understanding of economics. We report results for the first economics test administered to a large sample of students in Hawaii public high schools during the Spring 2004 semester. Our analysis focuses on evaluating the impact of a semester-long course in economics on student scores on a 20-question, multiple-choice economics test. We specify and estimate a regression analysis of exam scores that controls for other factors that could influence student performance on the exam. While student scores on the economics exam are relatively low, completion of an economics course and participation in a stock market simulation game each add about one point to student scores.

working paper


Analysis of Introduction of Plug-in Electric Hybrid Vehicles to Honolulu

The primary aim of this study is to understand the benefits and barriers which might be associated with the introduction of PHEV technology to Hawaii. This analysis illustrates that PHEV’s represent a much larger and more pervasive strategic opportunity than is generally appreciated in the State. Specific interests that guided our research were:

  • To estimate the impacts which relatively modest PHEV penetration rates might have on Hawaii’s GHG emission and fuel substitution goals.
  • To determine whether PHEV’s could be introduced to Hawaii without triggering major generating capacity additions.
  • To consider whether PHEV’s might play a role in optimizing the use of renewable wind resources that might otherwise be un-usable.
  • To assess the role of PHEV’s in the Hawaii’s attempt to control GHG emissions.

UHERO project report


Targeting Hawaii Greenhouse Gas Emissions Reductions: Emission Forecasts and Their Implications for Act 234

Act 234 calls for the state of Hawai‘i to return its greenhouse gas (GHG) emissions to 1990 levels by 2020. Under a business as usual environment, we forecast Hawai’i’s 2020 emissions to be between 18 and 34 percent above 1990 levels. Since transportation and electricity account for about 75 percent of Hawai’i’s GHG emissions, most likely a large share of the reductions will need to come from these sectors for Hawai’i’ to comply with Act 234.

Uhero project report


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