Annual Review of Resource Economics - Volume 15, 2023

The Annual Review of Resource Economics presents Professor Sir Partha Dasgupta in conversation with economist Dr. David Zilberman. In the conversation, we follow Sir Partha's life from his childhood in Bangladesh, where his father was a distinguished economist, to his childhood and undergraduate studies in India, his graduate studies in England, and his fascinating academic career, mostly in Cambridge, UK. We discuss Sir Partha's seminal contributions to multiple fields. He was among the founders of modern resource economics and the emerging multidisciplinary field of ecological economics. He also played a fundamental role in establishing the venues and agenda for research on the environment and development, led initiatives to incorporate nature into national accounting, and pioneered analysis of the economics of population growth and the foundation of a just society. We also learn about Sir Partha's family and life, his collaboration and perspective on leading scholars, and his vision for economics, science, and humanity.

More than five billion metric tons of agricultural residues are produced annually worldwide. Despite having multiple uses and significant potential to augment crop and livestock production, a large share of crop residues is burned, especially in Asian countries. This unsustainable practice causes tremendous air pollution and health hazards while restricting soil nutrient recycling. In this review, we examine the economic rationale for unsustainable residue management. The sustainability of residue utilization is determined by several economic factors, such as local demand for and quantity of residue production, development and dissemination of technologies to absorb excess residue, and market and policy instruments to internalize the social costs of residue burning. The intervention strategy to ensure sustainable residue management depends on public awareness of the private and societal costs of open residue burning.

In 2015, the United Nations and the G20 put food loss and food waste on the global agenda. While progress has been made since then, the scale of the problem persists because food loss and food waste are measured together, not separately. The paucity of data also poses a challenge. This article reviews the measurements, causes, and determinants of food loss as well as the interventions to reduce it. The review finds that food loss is considered in isolation, even though it is one of the causes and results of how agrifood systems function. The review calls for improved microdata collection and standardized measurements to separate food loss from food waste. Such efforts would help integrate feedback loops and cascading effects across the value chain with agrifood systems to identify intervention hot spots, trade-offs, and synergies of interventions as well as the effects of food loss reduction on socioeconomic, environmental, and food security goals.

An evolving literature evaluates the inferential and behavioral implications of measurement error (ME) in agricultural data. We synthesize findings on the nature and sources of ME and potential remedies. We provide practical guidance for choosing among alternative approaches for detecting, obviating, or correcting for alternative sources of ME, as these have different behavioral and inferential implications. Some ME biases statistical inference and thus may require econometric correction. Other types of ME may affect (and shed light on) farmers’ decision-making processes even if farmers’ responses are objectively incorrect. Where feasible, collecting both self-reported and objectively measured data for the same variable may enrich understanding of policy-relevant agricultural and behavioral phenomena.

Food fraud represents a serious threat to the integrity of the global agri-food marketing system and has received considerable attention by policy makers, academics, and the public at large. This review presents the conditions that enable fraudulent activity in agri-food supply chains (such as asymmetric information, imperfect certification processes, supply chain complexity, and weak monitoring and enforcement systems) and discusses recent efforts to document and deter food fraud and the growing theoretical and empirical literature on the economics of food fraud. The article concludes by identifying some gaps in the literature and provides suggestions for future research.

Nutrient pollution from agricultural sources, coming primarily from fertilization of row crops and manure from livestock operations, affects ecological health in the United States through water and air pollution. We summarize data trends on commercial fertilizer use, manure, cropland, and concentrations of nitrogen and phosphorus in waterways. We present data indicating that fertilizer applications per acre of US cropland exhibit an upward trend, with a strong spatial correlation between agricultural intensification and nutrient contents in waterbodies. While biophysical science has advanced our understanding of how nutrient pollutants affect the functioning of physical ecosystems, economic research has quantified only some of the economic damages related to losses in ecosystem services due to nutrient pollution. Our summary of this work indicates that quantification is incomplete and does not yet provide full characterization of these damages across the country. We summarize key available damage estimates and the limited evidence on cost-effective policy design. We conclude by identifying important yet understudied areas, including a focus on contaminated drinking water sources, health damages from nutrient pollution, and the need for holistic estimates of the costs of the externalities from pollution, where new research efforts will greatly benefit society.

Having experienced low prices for about a decade, the European Union Emissions Trading System has been supplemented with the market stability reserve (MSR) that adjusts the supply of allowances to market outcomes. We critically review the literature assessing the performance of the MSR against several policy objectives. In doing so, we cover both conceptual aspects and quantitative assessments. We conclude by pointing out important policy implications and open issues for further research.

Identifying mechanisms of real-life human decision-making is central to inform effective, human-centric public policy. Here, we report larger trends and synthesize preliminary lessons from behavioral economic and neuro-economic investigations focusing on environmental values. We review the currently available evidence at different levels of granularity, from insights into how individuals value natural resources (individual level), evidence from work on group externalities, common pool resources, and social norms (social group level) to the study of incentives, policies, and their impact (institutional level). At each level, we identify viable directions for future scientific research and actionable items for policy-makers. Coupled with new technological and methodological advances, we suggest that behavioral economic and neuroeconomic insights may inform an effective strategy to optimize environmental resources. We conclude that the time is ripe for action to enrich policies with scientifically grounded insights, making an impact in the interest of current and future generations.

Understanding the potential effect of environmental regulation on employment is of broad interest to key stakeholders. Concerns encompass both short- and longer-term effects on workers within the regulated sector, affected communities that already suffer from a lack of employment opportunities, and net employment in the overall economy. We begin our review by presenting a neoclassical microeconomic framework demonstrating how environmental regulations might affect labor demand. We then summarize the main empirical findings from the literature, including sector-specific partial equilibrium estimates and general equilibrium approaches to identifying the employment impacts of regulations. We also briefly describe the literature on how environmental regulations affect labor supply. Finally, we discuss remaining research gaps.

Traditionally, competition law and practice serve to preserve competition, with a focus on the maximization of consumer welfare. This has been criticized as conflicting with society's overarching goal of achieving greater (environmental) sustainability. Consequently, various jurisdictions have recently reformed their laws and guidance allowing them to account for sustainability benefits in the assessment of cooperation between competitors, with potentially considerable implications for how firms can jointly develop and introduce more sustainable technologies and products. This has opened a new research frontier in the long-standing tradition of marrying the theory of industrial organization with the field of environmental and resource economics. The consideration of sustainability benefits in competition analysis also requires both the transfer and adaptation of measurement techniques. We summarize recent developments and sketch potential research opportunities.

This article reviews recent economic studies on the causal effects of temperature on labor productivity. The negative effects of extreme temperatures are widespread, and the magnitudes of the impact differ across social and economic factors. In addition to physical outputs, extreme temperatures also impair mental productivity, including cognition and learning. In utero exposure to extreme temperatures has profound effects on human development. Although the literature has detected various adaptation strategies, the conclusions are mixed. We discuss some limitations of existing studies and propose several directions for future research.

This article reviews the literature on the financial sector impacts of natural disasters and physical climate change risks, covering banking, insurance, stock markets, bond markets, and international financial flows. Most studies have applied statistical approaches to historical data from developed countries to identify these impacts, while some have also used theoretical and computational modeling to assess future risks under climate change scenarios. The findings show that natural disasters and climate change risks generally lower insurer profitability and risk-sharing capacity, bank stability and credit supply, returns and stability of stock and bond markets, foreign direct investment inflows, and international lending. Factors such as income levels, rigorous financial regulations, capital abundance, market diversification, and adaptation strategies mitigate the negative effects. Natural disasters increase remittance inflows and financial assistance to low- and middle-income countries. We recommend future research on forward-looking computational modeling to assess the future financial sector impacts of climate change, while accounting for adaptation actions and their drivers. Future research should also consider hazard correlations and the interactions between financial industries and regions to more comprehensively assess the economic effects of natural disasters in general and for vulnerable countries in particular.

This review evaluates three micro and three macro estimation approaches to determine whether unrealistic differences exist in estimating the size of nonobserved/shadow economies. While some macro-MIMIC estimates are higher than estimates using the statistical discrepancy approach, when adjusting for double-counting, MIMIC approaches provide similar results. Macro approaches usually cover not only typical shadow economy activities, but also voluntary work, do-it-yourself activities, and classical crime activities; by nature, macro approaches will lead to higher and more accurate estimates than micro approaches. However, if certain adjustments are made, the estimated size of the shadow economy using the MIMIC approach comes close to the size of the shadow economy indicated by micro survey approaches. Hence, claims that macro approaches are unrealistically high and rely on unrealistic assumptions must be reconsidered.

We first discuss the genesis and development of the Food Security Module in the United States. We then present a conceptual model of food insecurity, drawing on consumer choice theory. The model shows how food insecurity exhibits a quality–quantity trade-off and has linkages to policy levers. Next, we present new stylized facts pertaining to food consumption for those who report food insecurity versus those who do not. Adults residing in food-insecure households consume lower-quality diets across the entire distribution of diet quality and experience more volatility in caloric intake. Males younger than 20 years in food-insecure households exhibit no differences in diet quality but consume fewer calories, while the opposite is true for younger females. We review the literature pertaining to the effects of federal food assistance programs on food insecurity. The Supplemental Nutrition Assistance Program tends to reduce household food insecurity, while having little to no effect on nutritional quality. Federal programs pertaining to children (i.e., the school food programs and the Special Supplemental Nutrition Program for Women, Infants, and Children) tend to reduce food insecurity while also increasing the nutritional quality of children's diet.

This article develops a conceptual framework on pathways through which noncontributory social protection can support resilient and inclusive agricultural growth in rural Africa. It draws insights from a review of rigorous empirical evidence on the impacts of cash transfers and multifaceted cash plus programs on a range of relevant productive outcomes, including accumulation of productive assets, inputs and farm management practices, off-farm labor and nonfarm enterprises, and farm production and income. This review demonstrates an emerging consensus in the literature: that access to social protection programs contributes positively to increasing the productive asset holdings of rural people, increasing the use of improved inputs and farm practices, and shifting away from casual wage labor arrangements. Moreover, there is limited evidence on heterogeneous effects across different baseline characteristics (income, sex, and labor-constrained households, among others). Finally, the article highlights how social protection programs should be considered an integral part of broader rural and agricultural development strategies in order to achieve a more productive, resilient, and equitable rural transformation in Africa.

Restoration of degraded ecosystems is essential for having a stable climate, reducing weather extremes and disease burden, producing enough food to feed growing populations, and generally keeping the world livable. However, we are currently rapidly degrading ecosystems worldwide, thus destroying the very basis of life. There is a major gap between what investments are needed to restore degraded ecosystems and prevent further degradation and what is actually being invested. In addition, most governments are still learning how to design and implement ecosystem restoration policies that are effective and efficient. Ecosystem restoration should be among our main scientific endeavors. This review fills a critical gap in the existing literature by providing a theory-informed understanding of the findings emerging from this highly policy-relevant strand of resource economics. The article also suggests key areas for future research.

Agroecology is often considered as the ultimate and most comprehensive solution to the many challenges of the agricultural and food system, also referred to as the agri-food system. This review investigates to what extent agroecology can become the mainstream model for transforming agriculture toward more sustainable and resilient agri-food systems within the given economic and political context. We find that enhancing agroecology will require a fully integrated multiscale systems approach from farm to region to globe. The approach must consider relevant processes and relationships, actors and stakeholders as well as drivers, sustainability indicators, and the respective assessment methods across all scales. Giving specific attention to drivers related to economy, technology, and policy we point out that agroecology needs to be economically viable for farmers and other food system actors. In particular, new and emerging technologies related to digitalization and breeding should be given more consideration in agroecological transformation. We stress the need for an analytical and operational framework and adequate multiscale policy design and suggest six areas of needed attention to support the large-scale adoption of agroecology.

Climate change undeniably impacts agriculture and natural resources, enterprises and markets. For informed decision making, there is a need for information on climate change adaptation possibilities and mitigation alternatives. Mathematical programming has been used to address the economic aspects of such questions and allows analysis as climate change moves the environment into previously unobserved conditions. It allows us to model spatial and dynamic features of the issue and analyze heretofore unobserved adaptation and mitigation possibilities. This review provides an overview of and references for modeling techniques, conceptual issues, and major assumptions involved with using mathematical programming as a climate change economic analyzing engine, along with a brief comparison with other methods. We also review a number of studies applying mathematical programming to examine climate change impacts, adaptation, and mitigation issues in the agricultural and natural resources arena. Finally, we present a very brief discussion on research needs.

Little progress has been made in reducing deaths from chronic noncommunicable diseases associated with being overweight or obese worldwide, prompting the World Health Organization and others to recommend the implementation of taxes on sugar-sweetened beverages (SSBs). In response, SSB taxes have been widely implemented over the last decade, and a burgeoning literature aims at understanding their effects. We assess the state of knowledge regarding the impacts of SSB taxes and provide context for the results reported to date based on the recent consumer behavior literature and incentives of supply-chain intermediaries in modern food markets. Evidence suggests only a portion of a tax on distributors or manufacturers is passed forward to consumers, inducing only mild and highly variable impacts on SSB purchases. We argue that the literature provides no consistent evidence that SSB taxes have incentivized increased purchases of healthier beverages and caused overall SSB consumption to decrease. Finally, we consider the efficacy of SSB taxes, alone or in combination with other policies, as part of jurisdictions’ policy goals, including promoting healthier diets, generating revenue, and improving equity.