Three Essays in Environmental and Agricultural Economic

This dissertation presents three essays in the intersection of agricultural and environmental economics in Brazil. Two of the essays investigate the introduction of two novel mechanisms for technological diffusion and environmental conservation in the Brazilian agricultural sector: bundled contracts and Transferable Development Rights. The third essay introduces an empirical model, the Quantile Ricardian model, which assesses climate change impacts in Brazilian agriculture using farm-level census data. To study the contribution of bundled contracts and Transferable Development Rights, and to assess the distribution of climate change impacts in Brazilian agriculture, I built and analyzed novel farm-level datasets of over 1.5 million farmers using confidential agricultural census data from the Brazilian Institute of Geography and Statistics.;The first chapter of this dissertation investigates the role of this bundled contract on the diffusion of soy technologies and the resulting effect on the productivity of the agricultural sector in Brazil. Bundled contracts are a promising mechanism for the diffusion of capital-intensive technologies in developing regions, including technologies designed to adapt crops to warmer climates. The introduction of a new type of farmer--trader contract, which bundles soy price guarantees, credit, technical assistance, and a technological package, has enabled rapid economic growth in Brazil's soy industry over the past 2 decades. To guide my empirical analysis, I model farmers' technological and contracting choices, focusing on the benefits of bundling in removing multiple barriers to the adoption of capital-intensive technologies in low-income regions such as the Brazilian Savanna. To model the contracting and technological choices of the farmers, I combine farm-level data for 1.5 million commercial farms from the 1996 and 2006 Brazilian agricultural census surveys, capturing the fastest period of soy expansion in Brazil. I present empirical evidence that contracting accelerates the diffusion of soy technology and increases the supply elasticity of soy. I estimate that the introduction of bundled contracts enabled 84% of the total soy expansion in the agricultural frontier of the Brazilian Savanna.;The second chapter estimates the impact of climate change in Brazilian agriculture. I estimate Quantile Ricardian functions using the population of commercial farms in Brazil in 2006 to investigate the heterogeneity of climate change impacts and to test the robustness of the Ricardian model. I present evidence that climate change impact estimates for commercial farms are stable across quantiles of farm productivity and robust to alternative model specifications. I find that the aggregated Brazilian agriculture sector is resilient to small increases in average temperatures and the economic impact of climate change for temperature increases of 2°C and 3°C is about half of previous estimates of climate change effects in Brazil using aggregated data. The Brazilian agriculture frontier, where the majority of soy expansion took place, however, is particularly vulnerable to climate change. In the Midwest region, a large 3°C increase in average temperature would reduce the value of agricultural land by one third, and the land value of Midwestern farms at the bottom quantile of productivity would be halved.;Chapter three assesses the potential of Transferable Development Rights to reduce costs of compliance with land diversion requirements in Brazil, and additionally to balance the competing efforts of agriculture expansion and forest conservation. Brazil has a rich endowment of natural vegetation and large potential for agricultural expansion, however, balancing expansion and conservation has been a challenge. With the advent of the newly revised forestry code, which aims to promote forest conservation, Transferable Development Rights have been introduced as means to facilitate compliance with the code. Using farm-level data from the agricultural census, I estimate a land-use model for commercial farms in order to recover the opportunity cost of forestland, which is the key determinant of conservation costs. I find large heterogeneity in the opportunity cost of forestland in Brazil, and that the trading of Transferable Development Rights would reduce compliance cost with land diversion requirements to just 1%-28% of the compliance cost without trading, depending on the geographical size of the market. Beyond compliance with land diversion requirements, I find that extending the trading of Transferable Development Rights to allow farmers to convert high-productivity land from natural vegetation to agriculture would generate significant gains from trading for all parties involved.