Prakash Mishra

The Allocative Efficiency of Global Deforestation

Deforestation is the consequence of a land allocation problem. Forests provide an environmental service while competing with agricultural, timber farming, or pastoral land uses. Because environmental forest values are unpriced, however, status quo forest loss is not necessarily first best. This paper identifies how much of global forest loss is misallocated: too high an environmental cost for too low an economic gain relative to other options. Using a hand-collected global dataset on land use, agricultural yields, and transportation costs, I document key facts about status quo deforestation as well as investigate whether environmental policy is well-targeted. I write down a dynamic land use model and estimate it using the Euler equation as a structural regression. Current estimates, identified by exogenous spatial variation in yields, suggest tropical deforestation internalizes less than $1 per kg Carbon per year, compared to social cost estimates on the scale of $40-$50. I use regression-identified land use parameters as inputs into structural model which for the first time marries components of the land use and spatial equilibrium literatures. In doing so, I endogenize land use decisions in a global demand system and explore counterfactuals such as: how would deforestation look globally under a first best policy? How much would agricultural production shift from areas with high old growth forest (such as the Amazon and Congo regions)? I then explore the use of coordinated tariffs as a more feasible alternative policy.

Trade openness and deforestation in agricultural markets

I study the staggered implementation of US standards on Mexican avocado production, aimed to curb local pests, on local deforestation. I find that improved market access for Mexican orchards dominates increased costs of doing business in effect size. The access effect leads to sustained deforestation up to 10 years out from when individual municipalities began exporting avocados under standards. Further, by using an index-based measure of deforestation (the normalized difference vegetation index, or NDVI) rather than a classifier, I convert this loss of tree canopy greenness into lost carbon capture. Using a $51 social cost of carbon, the policy created an environmental externality of at least $31 million across the affected region. Traditional classifier measures fail to capture the gradual deforestation carried out by small orchard owners, understating the true effect relative to my NDVI-based method by $9 million.

BEPP250 – MANAGERIAL ECONOMICS

This course will introduce you to “managerial economics” which is the application of microeconomic theory to managerial decision-making. Microeconomic theory is a remarkably useful body of ideas for understanding and analyzing the behavior of individuals and firms in a variety of economic settings. The goal of the course is for you to understand this body of theory well enough so that you can effectively analyze managerial (and other) problems in an economic framework. While this is a “tools” course, we will cover many real-world applications, particularly business applications, so that you can witness the usefulness of these tools and acquire the skills to use them yourself. We will depart from the usual microeconomic theory course by giving more emphasis to prescription: What should a manager do in order to achieve some objective? That course deliverable is to compare with description: Why do firms and consumers act the way they do? The latter will still be quite prominent in this course because only by understanding how other firms and customers behave can a manager determine what is beswt for him or her to do. Strategic interaction is explored both in product markets and auctions. Finally, the challenges created by asymmetric information – both in the market and within the firm – are investigated.

Winkelman Fellowship, 2021.

Russel Ackoff Doctoral Grants, 2021 and 2022.