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Improving the Way Land Use Change is Handled in Economic Models

Author

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  • Zhao, Xin
  • Van Der Mensbrugghe, Dominique
  • Keeney, Roman M.
  • Tyner, Wallace E.

Abstract

Sound economic modeling of land use in global economic models is critical for evaluating agricultural, biofuel, and climate policies. Current approaches do not preserve physical land area, do not account for the fact that land is of different qualities, or do not explicitly include the cost of converting land from one use to another. This chapter proposes a land use modeling framework building on the additive form of the constant elasticity of transformation (ACET) approach. We demonstrated that the framework could (1) directly provide traceable physical land use results, (2) flexibly handle land productivity differences based on biophysical information, (3) explicitly introduce land conversion cost, and (4) provide welfare decomposition in light of land heterogeneity and conversion cost. An experiment of mandating a 10% increase in grain consumption in the US food sector showed that ignoring land heterogeneity and conversion cost would underestimate the welfare loss by 28%.
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Suggested Citation

  • Zhao, Xin & Van Der Mensbrugghe, Dominique & Keeney, Roman M. & Tyner, Wallace E., "undated". "Improving the Way Land Use Change is Handled in Economic Models," 2019 Annual Meeting, July 21-23, Atlanta, Georgia 290903, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea19:290903
    DOI: 10.22004/ag.econ.290903
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    Cited by:

    1. Sampedro, Jon & Kyle, Page & Ramig, Christopher W. & Tanner, Daniel & Huster, Jonathan E. & Wise, Marshall A., 2021. "Dynamic linking of upstream energy and freight demands for bio and fossil energy pathways in the Global Change Analysis Model," Applied Energy, Elsevier, vol. 302(C).
    2. Alexandre Gohin, 2019. "General Equilibrium Modelling of the Insurance Industry: U.S. Crop Insurance," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 4(2), pages 108-145, December.
    3. Zhao, Xin & Calvin, Katherine & Wise, Marshall, 2020. "The critical role of conversion cost and comparative advantage in modeling agricultural land use change," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304204, Agricultural and Applied Economics Association.
    4. Srabashi Ray & Thomas W. Hertel, 2025. "Effectiveness and Distributional Impacts of Conservation Policies: The Role of Labor Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(5), pages 1147-1193, May.
    5. Haqiqi, Iman, 2022. "Implications of Climate Policy for Local Agriculture and Irrigation," Conference papers 333449, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Alexandre Gohin, 2020. "The Land Use Impacts of the EU Biodiesel Policy: Assessing the Direct, Indirect and Induced Effects," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(2), pages 305-329, June.
    7. Zhao, Xin & Calvin, Katherine V. & Wise, Marshall A. & Iyer, Gokul, 2021. "The role of global agricultural market integration in multiregional economic modeling: Using hindcast experiments to validate an Armington model," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 1-17.
    8. Qu, Yang & Swales, J. Kim & Hooper, Tara & Austen, Melanie C. & Wang, Xinhao & Papathanasopoulou, Eleni & Huang, Junling & Yan, Xiaoyu, 2023. "Economic trade-offs in marine resource use between offshore wind farms and fisheries in Scottish waters," Energy Economics, Elsevier, vol. 125(C).
    9. Xin Zhao & Katherine V. Calvin & Marshall A. Wise, 2020. "The Critical Role Of Conversion Cost And Comparative Advantage In Modeling Agricultural Land Use Change," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-44, February.
    10. Chad Fiechter & Binayak Kunwar & Guy Tchuente, 2024. "Monetary Incentives, Landowner Preferences: Estimating Cross-Elasticities in Farmland Conversion to Renewable Energy," Papers 2411.10600, arXiv.org.

    More about this item

    Keywords

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    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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