Butsic NASA LCLUC Science Team Meeting 4132017 Structural transformation increasing returns to scale and land use change or a proposal for a unified land use theory Introduction ID: 1018031
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1. Volker C. Radeloff, and Van ButsicNASA LCLUC Science Team Meeting 4/13/2017Structural transformation, increasing returns to scale and land use change – or a proposal for a unified land use theory
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3. IntroductionKauppi et al, 2006, PNAS
4. IntroductionDrummond and Loveland, 2010, BioScience
5. Introduction
6. Introduction
7. Introduction
8. IntroductionLand use change requires to unify three economic theories:Land rent theoryNew growth theoryNew trade theory
9. David Ricardo, 1809Comparative advantage results in specialization and tradeThe reason to grow the most valuable crops on the most fertile soilIntroductionLand rent theory
10. IntroductionJohann Heinrich von Thünen, 1826Transportation costs affect land rent Land rent theory
11. IntroductionJohann Heinrich von Thünen, 1826Transportation costs affect land rent Land use forms rings around citiesLand rent theory
12. IntroductionLand rent theory is great (!), but was developed for agrarian economies By itself, land rent theory does not explain current land use patternsThe problem with land rent theory
13. Introduction
14. IntroductionReturns to scaleIn agriculture, returns to scale are initially constant, and ultimately decreasing“Diminishing returns”InputsOutputs
15. However, increasing returns to scale are typical for manufacturing“Economies of scale”Hard(er) to modelIntroductionReturns to scaleInputsOutputs
16. Paul Romer, 1990Explained economic growth with increasing returns to scaleKnowledge accumulates and begets new technologyNew technology drives economic growthIntroductionNew growth theory
17. IntroductionStructural transformation
18. IntroductionNew trade theoryPaul Krugman, 1991Increasing returns to scale cause agglomerationCore and peripheryTrade
19. IntroductionNew trade theory
20. IntroductionNew trade theoryCorePeripheryResourcesWorkersGoods
21. IntroductionNew growth theoryis agnostic to spacedoes not address land use New trade theoryfocuses on cities and goods, not on the peripheries and land useignores environmental endowmentThe problems with new growth and new trade theory
22. IntroductionLand rent theoryComparative advantage leads to specialization and tradeTransportation costs matterNew growth theoryIncreasing returns to scale in manufacturingIdeas are the engine of growth Growth results in the structural transformation of economiesNew trade theoryIncreasing returns to scale lead to cores and peripheriesTrade connects the twoLegacies matterThe contributions of each theory
23. GoalTo explain land use change by unifying:Land rent theoryNew growth theory, and New trade theory
24. Conceptual modelLU : Land useS : Structure of the economyE : Environmental endowmentT : Transportation costsL : Land use legaciesLU = S, E, T, L
25. Conceptual modelStructure of the economyEnvironmental endowment Transportation costsLand use legaciesLand rent theoryNew growth theoryNew trade theoryLand use change
26. Conceptual modelS : Structure of the economyEmployment, GDP, and trade in agriculture, manufacturing, and service sectorsAg: Decreasing or constant returns to scaleMf: Increasing returns to scaleSv: Constant returns to scale (largely)New growth and new trade theory:S determines growth, agglomeration, and tradeS can change rapidly as an economy grows
27. Conceptual modelE : Environmental endowmentAg: Climate, soil quality, and topographyMf: Energy, and mineralsSv: Climate, scenic view, and natural amenitiesRicardo: land use with the highest net returns will occur where E is highest E can change over time due to new technology (e.g., drought resistant seeds), improvements (e.g., irrigation), or degradation from overuse
28. Conceptual modelT : Transportation costsDistance to roads and marketsTransportation technology and investmentsCustoms, tariffs, and trade agreementsvon Thünen: T results in rings around cityNew trade theory: non-linear relationshipHigh T: no trade nor agglomerationMedium T: Specialization, agglomeration, tradeLow T: Less agglomeration, cheaper labor in periphery
29. Conceptual modelL : Land use legaciesLegacies of prior land useFor urban areas: castles, transportation nodes, concentrated resourcesNew trade theory: Initially small differences in size of cities will exacerbate over time
30. Conceptual model
31. Conceptual modelAgrarian economyConstant or decreasing returns prevent agglomerationHigh transport costs cause land use ringsForest loss near citiesManufacturing economyIncreasing returns foster strong agglomerationCores and peripheries; trade and lower transport costs Core forests recover; new agriculture in peripheriesService economyConstant returns cause de-agglomerationCities sprawlForest loss due to exurban development
32. Conceptual model
33. Conceptual model
34. Conceptual model
35. Empirical model
36. Empirical model
37. Empirical model
38. Empirical model
39. Empirical modelForest transition in the US39 States lost > 25% forestOf these, 20 regained > 10 percentage pointsOf these, 8 lost > 5 percentage points in a 2nd wave of deforestationThese 8 lost on average half of the initial gainForest trends highly variable among US states!
40. IntroductionStructural transformation in the US
41. Empirical model
42. Empirical model
43. Empirical model
44. Empirical model
45. Empirical modelForest change patternYear peak manufacturingPeak manu-facturingLoss in manu-facturingLoss, recovery and 2nd wave of deforestation192052%-30 p.p.Loss and recovery195035%-11 p.p.Loss and no recovery197029%-7 p.p.
46. Empirical model1940
47. Empirical model2010
48. Empirical model2010
49. Empirical model
50. Empirical model (1)(2)(3)(4)% Max. Forest% Max. ForestForest AreaForest AreaManufacture-0.57***-0.59***-9,925***-11,813***Aftermax * Manufacture0.42***0.36***3,8475,169*Service-0.16**-0.14*-4,167***-3,211*Aftermax * Service-0.25*-0.24*-3,572-4,052Year effect*** ****** ***R-squared0.440.460.470.49Observations729665729665>10,000 km2 forestNoYesNoYes
51. Empirical model (1)(2)(3)(4)% Max. Forest% Max. ForestForest AreaForest AreaManufacture-0.57***-0.59***-9,925***-11,813***Aftermax * Manufacture0.42***0.36***3,8475,169*Service-0.16**-0.14*-4,167***-3,211*Aftermax * Service-0.25*-0.24*-3,572-4,052Year effect*** ****** ***R-squared0.440.460.470.49Observations729665729665>10,000 km2 forestNoYesNoYes
52. DiscussionTo explain land use change by unifying:Land rent theoryNew growth theory, and New trade theoryGoal
53. DiscussionThe structural transformation of economies is key for land use changeThe transition from agricultural to industrial economies leads to cores and peripheries, urban centers, abandonment, and forest transitionThe transition from manufacturing to service economy reduces agglomeration and hence causes sprawl and 2nd wave of deforestation
54. DiscussionLU : Land useS : Structure of the economyE : Environmental endowmentT : Transportation costsL : Land use legaciesLU = S, E, T, L
55. Discussion
56. Discussion
57. DiscussionBut!!!! What about?PoliciesTradeTechnological changeInstitutionsShocks…
58. DiscussionEconomic structureEnviron-mental endowmentTrans-portation costLand use legaciesPoliciesXXXXTradeXXTechnologyXXXInstitutionsXXXShocksXXXX
59. DiscussionWhere does this theory apply? Observed land use trends fit theoryUrban teleconnections Forest transitionUrban sprawl in maturing economiesIt now applies globally, because trade links cores with peripheries across continents
60. Discussion
61. DiscussionBaker et al., 1922
62. DiscussionDicken 2015
63. Discussion
64. DiscussionFuture of developed countriesKnowledge economy is highly agglomeratedAmenities and knowledge centers determine future coresThese cores will be centers of demand for global trade
65. DiscussionFuture of under-developed countriesNot all peripheries can become coresFew potential new peripheries left Africa? Oceans?Without new peripheries, forest transition in current agricultural peripheries unlikelyAgricultural economies may transition directly to service economiesPlus, agriculture is industrializing, thereby agglomerating crop types
66. DiscussionFuture of under-developed countriesNot all peripheries can become coresFew potential new peripheries left Africa? Oceans?Without new peripheries, forest transition in current agricultural peripheries unlikelyAgricultural economies may transition directly to service economiesPlus, agriculture is industrializing, and agglomerating crop types
67. DiscussionConservationNecessary to tailor conservation policies to the structure of the economyThe role of natural resources has diminishedValuing ecosystem services is insufficient to justify conservationConserving natural amenities that attract knowledge industries is key
68. ConclusionWhat is novel?Explaining land use based on “new” macroeconomic theoryLinking changes in the returns to scale, and hence the structural transformation of economies, directly to land use changeAccounting for the root causes for economic growth and trade
69. ConclusionStructure of the economyEnvironmental endowment Transportation costsLand use legaciesLand rent theoryNew growth theoryNew trade theoryLand use change
70. ConclusionLU : Land useS : Structure of the economyE : Environmental endowmentT : Transportation costsL : Land use legaciesLU = S, E, T, L
71. ConclusionWhat is novel?Unifying land rent, new growth, and new trade theory provides explanations for many of the major land use trendsForest transition, and 2nd wave of deforestationAgricultural expansion and abandonmentUrbanization and urban sprawlTele-connectionsIt offers a theory of land use change as a whole
72. ReferencesKrugman P (1991) Increasing returns and economic geography. Journal of Political Economy 99(3):483-499.Ricardo D (1817) On the Principles of Political Economy and Taxation (John Murray, London) p 604.Romer PM (1990) Endogenous technological change. Journal of Political Economy 98(5):S71-S102.von Thünen JH (1826) Der isolirte Staat in Beziehung auf Landwirtschaft und Nationalökonomie, oder Untersuchungen über den Einfluß, den die Getreidepreise, der Reichthum des Bodens und die Abgaben auf den Ackerbau ausüben (Friedrich Perthes, Hamburg) p 313.
73. Conclusion