Browsing by Author "Pfaff, Alexander"

This thesis tackles development policy issues that arise when institutions have unequal power. It contributes to three fields: International Political Economy; Industrial Organization; Global Value Chain Analysis. Within this intersection I examine the institutional constraints to economic development created by global markets. I approach this question by mathematically modelling surplus distribution along Global Value Chains to simulate policy measures.

It shows that policy interventions can shift surplus shares from developing countries to advanced economies in presence of market power asymmetries. This surplus shift occurs with environmental and labor standards applied in the presence of partially-substitutable goods; and trade-based development policies . The models I develop in these papers provide a framework for further empirical investigation and policies that are better aligned with development goals.

Monitoring and enforcement are perhaps the biggest challenges in the design and implementation of environmental policies in developing countries where the actions of many small informal actors cause significant impacts on the ecosystem services and where the transaction costs for the state to regulate them could be enormous. This dissertation studies the potential of innovative institutions based on decentralized coordination and enforcement to induce better environmental outcomes. Such policies have in common that the state plays the role of providing the incentives for organization but the process of compliance happens through decentralized agreements, trust building, signaling and monitoring. I draw from the literatures in collective action, common-pool resources, game-theory and non-point source pollution to develop the instruments proposed here. To test the different conditions in which such policies could be implemented I designed two field-experiments that I conducted with small-scale gold miners in the Colombian Pacific and with users and providers of ecosystem services in the states of Veracruz, Quintana Roo and Yucatan in Mexico. This dissertation is organized in three essays.

The first essay, “Collective Incentives for Cleaner Small-Scale Gold Mining on the Frontier: Experimental Tests of Compliance with Group Incentives given Limited State Monitoring”, examines whether collective incentives, i.e. incentives provided to a group conditional on collective compliance, could “outsource” the required local monitoring, i.e. induce group interactions that extend the reach of the state that can observe only aggregate consequences in the context of small-scale gold mining. I employed a framed field-lab experiment in which the miners make decisions regarding mining intensity. The state sets a collective target for an environmental outcome, verifies compliance and provides a group reward for compliance which is split equally among members. Since the target set by the state transforms the situation into a coordination game, outcomes depend on expectations of what others will do. I conducted this experiment with 640 participants in a mining region of the Colombian Pacific and I examine different levels of policy severity and their ordering. The findings of the experiment suggest that such instruments can induce compliance but this regulation involves tradeoffs. For most severe targets – with rewards just above costs – raise gains if successful but can collapse rapidly and completely. In terms of group interactions, better outcomes are found when severity initially is lower suggesting learning.

The second essay, “Collective Compliance can be Efficient and Inequitable: Impacts of Leaders among Small-Scale Gold Miners in Colombia”, explores the channels through which communication help groups to coordinate in presence of collective incentives and whether the reached solutions are equitable or not. Also in the context of small-scale gold mining in the Colombian Pacific, I test the effect of communication in compliance with a collective environmental target. The results suggest that communication, as expected, helps to solve coordination challenges but still some groups reach agreements involving unequal outcomes. By examining the agreements that took place in each group, I observe that the main coordination mechanism was the presence of leaders that help other group members to clarify the situation. Interestingly, leaders not only helped groups to reach efficiency but also played a key role in equity by defining how the costs of compliance would be distributed among group members.

The third essay, “Creating Local PES Institutions and Increasing Impacts of PES in Mexico: A real-Time Watershed-Level Framed Field Experiment on Coordination and Conditionality”, considers the creation of a local payments for ecosystem services (PES) mechanism as an assurance game that requires the coordination between two groups of participants: upstream and downstream. Based on this assurance interaction, I explore the effect of allowing peer-sanctions on upstream behavior in the functioning of the mechanism. This field-lab experiment was implemented in three real cases of the Mexican Fondos Concurrentes (matching funds) program in the states of Veracruz, Quintana Roo and Yucatan, where 240 real users and 240 real providers of hydrological services were recruited and interacted with each other in real time. The experimental results suggest that initial trust-game behaviors align with participants’ perceptions and predicts baseline giving in assurance game. For upstream providers, i.e. those who get sanctioned, the threat and the use of sanctions increase contributions. Downstream users contribute less when offered the option to sanction – as if that option signal an uncooperative upstream – then the contributions rise in line with the complementarity in payments of the assurance game.

To date, the creation of protected areas (PAs) has been the dominant policy in the efforts to protect forests. Yet there is still somewhat limited rigorous evidence about the impacts of PAs on rates of deforestation. Further, most of the existing evidence concerns the impacts of protection within the boundaries of PAs. Much of that existing evidence does not use the characteristics of the protected lands when generating the baselines to which outcomes on protected lands are compared in order to infer the PAs' impacts. Yet even when impact within a PA has been estimated as rigorously as possible, since the total impact of protection involves impact not only inside the PA but also outside the PA even the best possible estimates of impacts within PAs could mis-state total PA impacts. Overstatements occur if there is "leakage" from PAs, i.e., spillovers of activities to forests outside PAs, so deforestation outside is higher than it would have been without the PAs.

My dissertation starts with a reduced form examination of net local spillovers. We follow this with an evaluation of two mechanisms through which PAs could affect forest nearby. In particular we explore two novel angles by considering both migration choices and road building decisions. PA creation could affect the development equilibrium by shifting private and public expectations to lower migration and road building where the PA is established, beyond the PA's boundaries. My dissertation explores implications of such thinking and provides novel empirical evidence for the Brazilian Legal Amazon.

Chapter 1 estimates deforestation spillovers around Brazilian Amazon PAs. Given PA location bias towards regions with low deforestation pressure, we use matching methods to control for observable land characteristics that may confound PAs' impacts. Specifically, we compare 2000-2004 and 2004-2008 deforestation on the land nearby to PAs with clearing of untreated forests similar in key deforestation determinants. We find that some PAs reduce deforestation rates nearby and, consistent with deforestation impacts inside PAs, those local spillovers vary across the landscape. Reductions are significant near roads and cities − not expected if the result is due to insufficient empirical controls but unsurprising if real impacts are arising due to PAs − and around an understandable subset of PAs. This result contrast sharply with most existing analyses of PAs' spillovers where, if anything, 'leakage' (higher nearby clearing) is discussed and observed. Yet we affirm a more general point that local spillovers depend on local development dynamics.

Chapter 2 examines one mechanism for the prior result that PAs lowered rates of deforestation nearby. Given migration's importance throughout the history of this forest frontier, we ask whether dissuading migration could be a mechanism for protection's local conservation spillovers. Examining individual migration decisions among the Amazon municipalities, we find that Federal PAs − previously seen to reduce rates of deforestation near PAs − seem to encourage outmigration from and discourage migration to PA areas.

Chapter 3 examines another mechanism for the result in my Chapter 1. We consider a recent expansion of the unofficial roads networks in the Brazilian Amazon to provide initial evidence concerning whether PAs may affect such investments in development. Specifically, controlling for prior roads − both official and unofficial − we test whether the growth in unofficial roads between 2008 and 2010 is reduced by establishments of PAs. Thus, we examine road growth as another potential mechanism for forest spillovers from PAs. Controlling for relevant observable factors, and using both matching and OLS, we find that having a large fraction of municipal area in PAs − in particular Federal PAs − reduces the growth of unofficial roads. Such impacts can significantly influence regional development patterns.