Edited by Henk Folmer, H. Landis Gabel, Shelby Gerking and Adam Rose
Chapter 3: Spatial economic aspects of the environment and environmental policy
Shelby Gerking and John List 1 INTRODUCTION The spatial dimension in economic analysis has been a subject of resurgent interest in the 1990s beginning with Krugman’s (1991a, 1991b) application of models by Dixit and Stiglitz (1977) to ‘economic geography’. By 1998, The Economist magazine’s listing of top economists under the age of 35 included three (Edward Glaeser, Glenn Ellison and Andrei Schleifer) who have contributed key papers on the location of industry and economic growth in cities. Spatial issues have also recently attracted increasing attention among natural resource and environmental economists. As indicated by Deacon et al. (1998, p. 393), spatial aspects of resource use may turn out to be as important as the more frequently studied temporal dimension. They suggest that links between land use, land-use policy, ecosystem function and open space and other directly valued environmental amenities represent key areas where additional research may have a high payoff. Sanchirico and Wilen (1999) treat these links in greater depth and Bockstael and Irwin (2000) provide a comprehensive survey of land-use issues from an environmental perspective. This chapter examines additional spatial aspects by focusing on the intersection between environmental and natural resource economics and regional and urban economics. The main theme developed is that the environment and government policy to protect it both affect and are affected by geographic factor mobility, both within and between countries. This interaction has not been extensively treated; yet, it contains a broad range of interesting research questions such as: to what extent do environmental...
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