This paper examines the impact of climate change on rich and poor countries across the world. We measure two indices of the relative impact of climate across countries, impact per capita, and impact per GDP. These measures sum market impacts across the climate-sensitive economic sectors of each country. Both indices reveal that climate change will have serious distributional impact across countries, grouped by income per capita. We predict that poor countries will suffer the bulk of the damages from climate change. Although adaptation, wealth, and technology may influence distributional consequences across countries, we argue that the primary reason that poor countries are so vulnerable is their location. Countries in the low latitudes start with very high temperatures. Further warming pushes these countries ever further away from optimal temperatures for climate-sensitive economic sectors.

This essay introduces a special section of this issue containing a set of papers on the dynamics of coupled human and natural systems. We frame this introduction by setting out some of the major issues confronting researchers who wish to incorporate both economic and biophysical dynamics in their analysis. We contrast the three papers contained in this section in terms of how they respond to these different issues. We conclude that these papers provide important new insights on both how to model and analyze dynamic coupled human and natural systems and how to define policies that will lead to improved human well being and environmental conditions.

We consider the redistributive effects of privatizing a resource previously exploited under free access. We assume that illegal extraction is punished but that the sanction is bounded by individuals' wealth. First, we show that a segment of intermediate-wealth individuals is the most adversely affected from the regime change, while the poorest segment is not only less severely affected, but may actually gain from it. Next, we show how the authorities may prefer to choose an intermediate enforcement level in order to maximize the political acceptability of the regime switch among the local community.

This paper investigates the effects of pollution taxation for a dual developing economy with a separate abatement sector. Due to the real rigidity of the urban wage, pollution taxes raise the cost of the urban good and hence its relative price. This suggests that because of flexible rural wages, the developing economy tends to have a comparative advantage in the rural good which may be less polluting. Moreover, the higher price of the urban good worsens the urban unemployment ratio. The optimal tax on pollution is thus lower than the marginal environmental damage to the economy.

We solve directly a general maximin (sustainment, intergenerational-equity) problem. Because the shadow values of a maximin problem do not correspond to the shadow values from a general discounted-utility solution, they correspond to the prices of only a very special competitive economy. Virtual discount factors for the economy arise. They do not correspond to hyperbolic discount factors. Hartwick's rule is derived and generalized naturally to take into account non-autonomous and non-deterministic features of the economy. Under uncertainty, Hartwick's rule is the analytic expression of a form of precautionary principle. Hotelling's rule is a necessary condition, but may be more complex than has been appreciated in simple models. Some interpretations of strong sustainment are special cases of weak sustainment but, paradoxically, may be more difficult to solve.

This special issue results from a call for papers to address the connection between resilience and sustainability, and stems from the fact that the ecological concept of resilience has been exercising an increasing influence on the economics of development. Resilience is interpreted in two different ways by ecologists: one capturing the speed of return to equilibrium following perturbation (Pimm, 1984), the other capturing the size of a disturbance needed to dislodge a system from its stability domain (Holling, 1973). The latter may be interpreted as the conditional probability that a system in one stability domain will flip into another stability domain given its current state and the disturbance regime (Perrings, 1998). The relevance of this concept for the problem of sustainable economic development has been recognized for at least fifteen years (Common and Perrings, 1992). Indeed, Levin et al. (1998) claimed that resilience is the preferred way to think about sustainability in social as well as natural systems, and a research network – the Resilience Alliance – has subsequently developed around the idea.

The choice of appropriate discount rate for comparing the long-term health benefits of policies is a complex issue. This study contributes to this sparsely researched issue from the perspective of developing countries by estimating the implicit discount rate that workers reveal through their willingness to incur death risks on-the-job and quantity-adjusted value of life of workers using an original data set from the Indian labor market. The estimated real discount rate ranges from 7.6 to 9.7 per cent, which is closer to the financial market rate for the study period and consistent with earlier studies from developed nations. The estimated value of life ranges are Rs. 24.3–26.5 (US $1.34–1.47) million. The results of the study can aid policy makers, international agencies, and researchers in evaluating health projects in India and other developing nations.

Fossil fuel combustion generates both CO2 and SO2. CO2 is the most important greenhouse gas; SO2 can cause serious local pollution. But it can alleviate the potential global warming because of negative radiative forcing. Such a phenomenon can be characterized as negatively correlated local and global stock externalities. In this paper, we set up an optimal control problem of negatively correlated local and global stock externality provision. The efficiency conditions for this problem are derived. These conditions modify the Samuelson rules for optimal provision of externalities. In addition, we examine several policy related scenarios of negatively correlated local and global stock externality provisions. Finally, we discuss policy implications and limitation of the theoretical results derived in this paper. We also indicate applications of the theoretical results here to empirical research, particularly to economic analysis of multiple-gas issues in climate change.

Allowing water to be traded in an irrigation system with de facto riparian rights can increase the efficiency of water use. With irrigation supplementing uncertain rainfall, both supply and demand for water are uncertain. When rainfall events are positively correlated, water supply and demand movements are negatively correlated, causing large price fluctuations. Using a stylized two crop, two region irrigation system, numerical integration over a bivariate rainfall distribution is used to demonstrate the impact of varying rainfall correlation on water price, expected returns, and return variability. A spot market for water captures the majority of the returns to water rights transfers, relative to a complete market. This spot market results in higher returns and reduced return volatility for farmers in the water deficit region, while farmers in the water surplus region see greater returns but also greater return volatility.

Food-for-work (FFW) programs are commonly used both for short-term relief and long-term development purposes. This paper assesses the potential of FFW programs to reduce poverty and promote sustainable land use in the longer run. There is a danger that such programs distort labor allocation or crowd out private investments and therefore have unintended negative effects. We explore this issue using survey evidence from northern Ethiopia that we use to motivate a simple theoretical model, a more detailed version of which we then implement through an applied bio-economic model calibrated to northern Ethiopia. The analysis explores how FFW project outcomes may depend on FFW project design, market conditions, and technology characteristics. We show that FFW programs may either crowd out or crowd in private investments and highlight factors that condition whether FFW promotes or undercuts sustainable land use.

In a widely cited paper, Andreoni and Levinson (2001) argue that, under very mild restrictions on preferences, increasing returns to scale in pollution abatement are a sufficient condition for pollution to ultimately fall to zero with income growth. We show that the existence of an Environmental Kuznets Curve depends on the relative magnitudes of the returns to scale in abatement and in gross pollution, rather than on their absolute values. Increasing returns to scale in abatement by themselves are not sufficient for pollution to fall with income unless the returns to scale of abatement exceed the returns to the production of gross pollution.

Policies to influence land use decisions in agriculture or grazing can increase the ability of invasive species to out-compete native species and thereby disrupt seemingly stable ecological-economic systems. Building off of models of interdependent resources, invasive species and soil fertility, this paper develops a model of shifting cultivation decisions for two types of farmers, one who sees the threat of invasive grasses and one who does not. The paper uses numerical solutions to this dynamic decision problem to examine the impact of various policies on farmer welfare and on the stability of the economic-ecological system. Some policies undermine the resilience of the system, while other policies augment the system's ability to withstand species invasions.

Economic impacts that entry regulations have within the fishery industry are well documented in the economics literature. This study looks at how fishery regulations will impact other sectors of a regional economy. By developing integrated models of fishery bioeconomics and dynamic, inter-industry economic linkages, the paper estimates sector-wise economic gains and losses over time from an entry regulation. A case study from India shows that primary fishing and processing sectors realize significant wage and profit gains after a period of transition. Sizable losses in wage and industry profits are incurred by non-fishery sectors but are smaller than the profit gains in the primary sectors. The paper makes policy recommendations on how to ease the adverse regional impacts of fishery policies.

Agricultural systems are complex and dynamic, being made up of inter-acting bio-physical and human sub-systems. Moreover, agricultural systems are re-markably diverse, both within geographic regions and across regions. Accordingly, this paper focuses on dynamics and heterogeneity in coupled, multi-disciplinary simulation models of agricultural systems. We begin with a discussion of the principal features of agricultural production systems. We then present an example of a ‘loosely coupled’ model, the type of model most researchers have used to represent agricultural systems. We discuss the loosely coupled model's features and limitations, and show how it can be modified to incorporate feedbacks among sub-models. Finally, we use a case study of a hillside production system in Ecuador to illustrate the importance of model coupling, dynamics and heterogeneity in the analysis of production systems. This example shows that feedbacks and threshold effects are most important at sites most vulnerable to tillage erosion.