THREE ESSAYS ON THE ECONOMICS OF ECOSYSTEM SERVICES AND LAND USE CHANGE

Over the past few decades, agricultural and forest lands in the northeast US have been lost to residential development. Combined with more intensive farming on remaining lands, these trends have led to losses in valuable ecosystem services from the agricultural and forest landscape. Narragansett Bay is also exhibiting an increasing array of eutrophic-associated symptoms, including low dissolved oxygen, fish kills, eelgrass loss, algae blooms, and loss of submerged aquatic vegetation (Narragansett Bay Estuary Program, 2008). This dissertation contains three essays to quantify and value the changes in ecosystem services and to evaluate the effectiveness of policy for land use management. Manuscript 1 seeks to illustrate a method for spatially quantifying hydrological ecosystem services (water quality and quantity) related to wildlife habitat and flood risks, as well as the production of ecosystem services (food and fiber) at the watershed scale. I also investigate the effects of stressors faced in the coming decades—land use change and climate change—as well as choices in land management practices on production of these ecosystem services. I demonstrate the approach in the Beaver River watershed in Rhode Island using a spatially-explicit, process-based hydrological model (SWAT). My key finding is that choices in land use and land management practices create tradeoffs across multiple ecosystem services and that the extent of these tradeoffs depends considerably on the scenarios and the ecosystem services being compared. Stressors such as urbanization, increased agriculture intensity and climate change make spatially explicit modeling necessary to understand the complex relationships between efficient land use and the complexity in the function of ecosystems. My second manuscript examines the direct and spillover effects of residential zoning policy on land development. Zoning has been widely used as a tool to manage residential development. Residential zoning policy regulation, particularly minimum lot size zoning restrictions in one area may affect the land development of the area itself as well as in the adjacent areas. Accounting for both the direct and the potential spillover effects of minimum lot size zoning restrictions is important for land use planning. However, limited research has been done to examine the spillover effect of minimum lot size zoning restrictions on nearby land development. In this study, I estimate the direct and spillover effect of minimum lot size zoning restrictions in Rhode Island. To address the non-random placement of residential zoning, I use propensity score matching and nearest neighborhood matching to preprocess the data. Additionally, to address simultaneity and the presence of spatially correlated unobserved characteristics, I use the soil construction constraint index as an instrumental variable for minimum lot size restriction. Results suggest that minimum lot size restrictions in the neighborhood significantly decrease the probability of urban development outside of the zoned area, up to a 2000 meters radius buffer. In my third manuscript, I examine the impact of water quality in Narragansett Bay on housing prices in coastal towns and municipalities using a hedonic housing price model. Compared with other water quality related hedonic studies, I combine an improved inversed distance weighted (IDW) interpolation method with water quality region, to best capture the water quality in Narragansett. Additionally, I compare different measures of Chlorophyll concentration as indicators of coastal water quality. Estimation results show that the coastal water quality indicator for Chlorophyll concentrations has a negative impact on the housing prices, and the negative impact of water quality attenuates with increasing distance from the shoreline. In the comparison of alternative measurements for water quality, I find a substantial difference among the estimations results. I further estimate potential increases in the value of the housing stock associated with different scenarios for water quality improvements in Narragansett Bay