2002 World Congress of Environmental and Resource Economists

Our paper addresses several challenges of environmental valuation with a case study from Indonesia in which forest protection policies in upstream watersheds in Ruteng stabilize soil and hydrological flows in downstream farms. We focus on the demand for a weak complement to the ecosystem services – farm labor - and find evidence of spatial dependence. The estimated economic models have theoretically expected properties that are robust across 12 different specifications. The estimated coefficients show that forest ecosystem functions provide economically substantive benefits to local people. Failing to account for spatial dependence leads to a substantial undervaluing of the ecosystem services in some of the models. The overall findings suggest that protection of tropical forest watersheds is a direct way to meet the twin goals of conserving ecologically rich landscapes and developing poor economies.



	Paper Title:	Complementarity Of Forests And Farms: A Spatial Econometric Approach To Ecosystem Valuation In Indonesia
	Presenting Author:	Subhrendu K Pattanayak (Research Triangle Institute)
	Coauthor 1:	D T Butry
	Coauthor 2:
	Coauthor 3:
	Abstract:	Our paper addresses several challenges of environmental valuation with a case study from Indonesia in which forest protection policies in upstream watersheds in Ruteng stabilize soil and hydrological flows in downstream farms. We focus on the demand for a weak complement to the ecosystem services – farm labor - and find evidence of spatial dependence. The estimated economic models have theoretically expected properties that are robust across 12 different specifications. The estimated coefficients show that forest ecosystem functions provide economically substantive benefits to local people. Failing to account for spatial dependence leads to a substantial undervaluing of the ecosystem services in some of the models. The overall findings suggest that protection of tropical forest watersheds is a direct way to meet the twin goals of conserving ecologically rich landscapes and developing poor economies.
	Link to paper:	http://weber.ucsd.edu/~carsonvs/papers/861.pdf

	Session / Day / Time	1C / Monday / 8:00 - 10:00 am

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