Three Essays on Resource Use, Sustainability and Agricultural Productivity

This dissertation consists of three essays. The first essay presents a dynamic model that analyzes the simultaneous use of a polluting non-renewable resource (coal) and an alternative technology (solar energy). It contributes to the literature by presenting a conceptual framework to characterize the production, exports and imports of a polluting non-renewable resource in the presence of a high cost substitute renewable technology. Results indicate that by ignoring external costs, inter-temporal social welfare from using both energy sources is overestimated and these market failures can be corrected by imposing a tax equal to the external cost per unit of coal used to induce the first best outcome. Subsidizing the backstop by an amount equal to the tax is a second best solution. The second essay analyzes the extent to which climatic variability affects agricultural productivity across LAC countries. The estimation is based on a stochastic production frontier, which is used to decompose total factor productivity (TFP). The results show that average annual temperature and precipitation have a negative significant impact on production and these adverse effects are getting more pronounced over time. Climatic variability has a more severe impact on Caribbean and Central America countries. Technological progress is found to play a key role in climate adjusted total factor productivity change. South and Central American countries are catching-up to their production frontier. TFP for these countries, except for Nicaragua and El Salvador, is converging to that of Brazil, which defines the frontier. All Caribbean countries are lagging behind and not converging. The third essay adopts a dynamic stochastic production frontier in which technical inefficiency from production is allowed to be auto-correlated over time. Results reveal that there are systematic differences in production and TE across LAC countries. Agricultural R&D is a determining factor in inefficiency levels. The mean rate of return on agricultural R&D across the 11 LAC countries is estimated to be 16.0%. The results indicate that the El Niño–Southern Oscillation accounts for an average annual loss in agricultural output equal to US $484 million in 2005 values across the LAC countries included in the analysis