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Spatial Complementarity of Forests and Farms: Accounting for Ecosystem Services

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  • Subhrendu K. Pattanayak
  • David T. Butry

Abstract

Our article considers the economic contributions of forest ecosystem services, using a case study from Flores, Indonesia, in which forest protection in upstream watersheds stabilize soil and hydrological flows in downstream farms. We focus on the demand for a weak complement to the ecosystem services—farm labor—and account for spatial dependence due to economic interactions, ecosystem processes, and data integration. The estimated models have theoretically expected properties across eight different specifications. We find strong evidence that forest ecosystem services provide economically substantive benefits to local people and that these services would be substantially undervalued if spatial dependence is ignored. Copyright 2005, Oxford University Press.

Suggested Citation

  • Subhrendu K. Pattanayak & David T. Butry, 2005. "Spatial Complementarity of Forests and Farms: Accounting for Ecosystem Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 995-1008.
    • Handle: RePEc:oup:ajagec:v:87:y:2005:i:4:p:995-1008
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2005.00783.x
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    References listed on IDEAS

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    1. Pattanayak, Subhrendu K. & Kramer, Randall A., 2001. "Worth of watersheds: a producer surplus approach for valuing drought mitigation in Eastern Indonesia," Environment and Development Economics, Cambridge University Press, vol. 6(1), pages 123-146, February.
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    5. Won Kim, Chong & Phipps, Tim T. & Anselin, Luc, 2003. "Measuring the benefits of air quality improvement: a spatial hedonic approach," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 24-39, January.
    6. Luc Anselin, 2001. "Spatial Effects in Econometric Practice in Environmental and Resource Economics," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 705-710.
    7. Huang, Ju-Chin & Kerry Smith, V., 1998. "Weak complementarity and production," Economics Letters, Elsevier, vol. 60(3), pages 329-333, September.
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