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Drivers of rural land use in New Zealand: Estimates from National Data
Abstract
Rural land-use decisions have direct impacts on many environmental issues, including greenhouse gas emissions, erosion, and water quality issues. By studying the relationship between rural land-use decisions and economic returns, we take a step toward understanding what New Zealand’s future land-use path is likely to be, and how land-use may respond to differing environmental policies. In this paper, we study the responsiveness of four major rural land uses (sheep/beef, dairy, forestry, and abandoned land reverting to native bush) to exogenous shocks in commodity prices. We derive a theoretical model of land-use choice in terms of a portfolio decision, consistent with an “Almost Ideal Demand System”. We estimate a long-run relationship between land-use area for and prices, using 29 years of data. We then use an error-correction model to explore the timing of adjustment of rural land-use to price shocks.
Citation
Kerr, Suzi and Joanna Hendy. 2004. "Drivers of rural land use in New Zealand: Estimates from National Data," Motu Manuscript.
Motu code: MEL0368
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