Gradual Land-use Change in New Zealand: Results from a Dynamic Econometric Model

Abstract

Rural land use is important for New Zealand’s economic and environmental outcomes. Using a dynamic econometric model and recent New Zealand data, we estimate the response of land use to changing economic returns as proxied by relevant commodity prices. Because New Zealand is small, export prices are credibly exogenous. We show that land use responses can be slow. Our result implies that policy-induced land-use change is likely to be slow or costly.

Spatial and Temporal Responses to an Emissions Trading Scheme Covering Agriculture and Forestry: Simulation Results from New Zealand

“…We interpret the increasing scrub share as abandoned sheep-beef land. As noted by Kerr and Olsen [11], our dynamic results for gradual land-use change are similar to those of Stavins and Jaffe [27] and consistent with Hornbeck [28].…”

“…It is implemented via two interacting revealed-preference econometric models: a dynamic national land-use share model [11] and a static geographic land-use allocation model [12]. LURNZ simulates land use, rural production and greenhouse gas emissions for all private rural land in New Zealand annually at a 25-hectare resolution; the current model builds on earlier foundational work in Hendy et al [15].…”

“…The coefficients of the dynamic econometric model are estimated using historical commodity prices [11]. Milk solids prices are reported in the Livestock Improvement Corporation's (LIC) Dairy Statistics reports; the sheep-beef price is a composite export unit value calculated from New Zealand's Overseas Merchandise Trade data set; forestry log prices are export unit values that match MAF's values for logs and poles for every year that they report data.…”

“…These projections are generated using coefficients from a dynamic econometric model of land use [11] that generalizes the models in Pfaff et al [16] and Irwin and Bockstael [17] to multiple land uses. We model the effect of emissions trading through adjustments to commodity prices received in each rural sector.…”

“…The appendix contains details on how LURNZ models national-level land-use change. Details for other components of the LURNZ model are in Kerr and Olsen [11], Timar [12], Timar [13] and Anastasiadis et al [14].…”