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Externalities and labour market linkages in a dynamic two-sector model of tropical agriculture

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  • SHIVELY, GERALD E.

Abstract

This paper examines environmental and labour market linkages between two agricultural systems-one upstream and another downstream. Using data from the Philippine province of Palawan as a point of departure, the paper develops a dynamic, two-sector model of an agricultural watershed to study the evolution and impact of an erosion externality. Attention focuses on the interplay between erosion generated by the extensive upstream sector and labour productivity in a labour-intensive downstream sector. A key feature of the model is that labour productivity and labour demand downstream are influenced by the externality generated upstream. Production of the externality, in turn, is influenced by wage employment opportunities downstream. Time paths of equilibrium wages are derived. A simulation is used to study the impact of environmental payments to upland households in exchange for allocating labour away from the externality-producing activity. The analysis shows how natural processes and economic interactions between two groups influence the benefits of agricultural intensification.

Suggested Citation

  • Shively, Gerald E., 2006. "Externalities and labour market linkages in a dynamic two-sector model of tropical agriculture," Environment and Development Economics, Cambridge University Press, vol. 11(1), pages 59-75, February.
    • Handle: RePEc:cup:endeec:v:11:y:2006:i:01:p:59-75_00
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    Cited by:

    1. Perrings, Charles, 2014. "Environment and development economics 20 years on," Environment and Development Economics, Cambridge University Press, vol. 19(3), pages 333-366, June.
    2. Angelsen, Arild, 2007. "Forest cover change in space and time : combining the von Thunen and forest transition theories," Policy Research Working Paper Series 4117, The World Bank.
    3. Coxhead, Ian A. & Demeke, Bayou, 2006. "Modeling Spatially Differentiated Environmental Policy in a Philippine Watershed: Tradeoffs between Environmental Protection and Poverty Reduction," 2006 Annual meeting, July 23-26, Long Beach, CA 21115, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Namara, Regassa E. & Hanjra, Munir A. & Castillo, Gina E. & Ravnborg, Helle Munk & Smith, Lawrence & Van Koppen, Barbara, 2010. "Agricultural water management and poverty linkages," Agricultural Water Management, Elsevier, vol. 97(4), pages 520-527, April.

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