Agricultural Amenities and Optimal Land Use: The Case of Israel

1. Agricultural Amenities and Optimal Land Use:The Case of Israel Iddo Kan, §† David Haim.† Mickey Rapaport-Rom† and Mordechai Shechter† § The Department of Agricultural Economics and Management; The Robert H. Smith Faculty of Agriculture, Food and Environment; The Hebrew University of Jerusalem, Israel. † Natural Resources and Environmental Research Center; University of Haifa, Israel.

2. Multi-Functionality of Agriculture • Conservation of Land • Fostering Water Resources • Preservation of the Natural Environment • Development of Favorable Landscapes (Amenities) • Maintenance of Cultural Heritage • Recreation/Relaxation • Viability of Rural Community • Food Security

3. Studies on Agricultural Amenities Evaluations of positive effects of agricultural landscapes USA - Halstead (1984), Bergstrom et al. (1985), Beasley et al. (1986), Ready et al. (1997); Canada - Bowker and Didychuk (1994); Austria - Hackl and Pruckner (1997); Israel - Fleischer and Tsur (2003, 2009). Fleischer and Tsur analyze the impact of amenities on rural-urban land allocation under population growth. They assume constant-return-to-scale of agricultural activities. In other words, they ignore changes in intra-agricultural land allocation among crops. Our study focuses on improving social welfare by re-allocation of land among crops. Impacts of agricultural amenities on urban-rural land allocation McConnell (1989), Lopez et al. (1994), Brunstad et al. (1999), Fleischer and Tsus (2009). Estimations of amenity values associated with different crops Drake (1992), Brunstad et al. (1999), and Fleischer and Tsur (2009).

4. Assumptions • Policy: Regional communities consider setting a policy to encourage farmers to replace the profit maximization (PM) land allocation with the socially optimal (SO) land allocation; E.g., by compensating farmers for the profit-loss associated with the deviation from the PM solution. • Amenity Benefits: Each community takes into account only the amenities provided by the region’s agricultural lands, and only to the local residents. • Land Allocation: Rural-urban land allocations are not affected by the policy.

5. Research Questions • What is the impact of agricultural amenities on the socially optimal intra-agricultural land allocation among crops? • What is the welfare loss associated with ignoring the amenity value? • How the size of regional areas influences the benefits obtained from encouraging the growing of high-amenity crops?

6. Methodology Developing a regional scale agricultural land-use positive-mathematical programming model (based on Howitt, 1995): (Suitable when only limited amount of land-use data is available) Stage I. Calibrating the model such that it reproduces land use observed in a base-year (2002) (the assumed profit-maximization solution). Stage II. Computing optimal allocation of land among crops when the amenity value is introduced into the objective function (the socially-optimal solution).

7. First Stage Calibrating the cost functions based on the assumed profit maximization solution Second Stage Adding the amenity-value function and calculating the socially optimal solution The Mathematical Programming Model

8. Welfare Increase py-F py-F Profit Loss Amenity Value Increase PM Solution SO Solution Calibrating for land allocation under the PM solutionand solving for the SO land allocation Tomato (Greenhouse) Wheat (Open field) py-b-d(500-l)+A py-b-d(l) py-b-d(500-l) $/hectare-year Land (hectares)

9. Fleischer & Tsur (2009): L1 = Orchards & CitrusL2 = Vegetables, Field Crops & Preserved Open SpacesL3 = Greenhouses Depends on regional specific factors (income, etc.) The Mathematical Programming Modelunder the Socially-Optimal Solution

10. Marginal (maximal) Amenity Value:Variation with Regional Agricultural Size

11. Regional Size Effect

12. Natural Regions Israel -Partitioning intoNatural Zones

13. Observed Nationwide Land Allocation among 45 Crops (2002, The Assumed Profit-Maximization Solution) Vegetables & Field Crops Orchards & Citrus Greenhouse

14. Nationwide Results 18.6/2.5 ≈7.5 30%

15. Regional Scale Changes in Welfare Elements($/yr)

16. Regional Scale Changes in Welfare Elements (%) Conclusion Allow local communities to decide on policy implementation, rather than applying a nationwide program.

17. Regional Size Effect In regions larger than L0, the PM land allocation may also be the SO land allocation. Partitioning the country into larger regions increases the probability of such events. However, the amenity-value function itself may depend on the regional scale. Thus, it is essential to conduct such an analysis while using an amenity-value function, which is estimated based on the same regional partition.

18. Concluding Remarks • Nationwide benefits are estimated at only 2.4%, whereas regional benefits amount to up to 15%. Therefore: It is recommended to grant local communities the authority to decide on policy implementation, instead of applying a nationwide program. • Why are the SO and PM land allocations so similar? a) Willingness to pay may be small. b) The preferred agricultural landscape may be similar to the observed one due to adaptation of the population to its surrounding. • What are the implications of the regional size effect? a) It is essential to use an amenity-value function, which is estimated based on the same regional scale, as done here. b) However, it is unknown whether the selected partitioning of the country into “natural zones” represents the actual exposure of residents to the agricultural landscape in their surrounding.

19. Thank you for your attention!