Thesis Proposal Abstract

Effective mine reclamation, particularly regarding water pollution, is a critical issue to which more policymaker attention is required. Although mining practices always carry some environmental risks, there are policies available to reduce these risks. In order to formulate and implement effective water remediation policies, mining companies and policymakers must collaborate to both improve mining practices during mine operation and to identify effective post-mine-closure strategies. In this thesis I investigate through meta-analysis and case studies how effective the current reclamation bond policies are at addressing the environmental concerns of mining. In particular, my research focuses on bonds as a tool for proactive environmental policy; efficient reclamation bond pricing is a key point of investigation. My research illustrates how risk analysis can be incorporated into policy formation, and the use of deposit-refund mechanisms to increase efficiency and mitigate environmental damages, thus lowering costs to society.

The research paper I wrote about my research in NW China in the summer of 2010

The Impact of the Great Western Development Strategy on Northwestern China[1]

Richard Mack, Ph.D. Central Washington University

Isa Harrison, Central Washington University

Meredith Houck, University of North Carolina-Ashville

Naushin Jiwani, New College of Florida

Jennie Welch, Bucknell University

August 1^st, 2010

I. Abstract

The purpose of this research was to examine the impact of the Great Western Development Strategy on the economic, social, and environmental conditions of northwest China. It focuses in particular on changes occurring in the northwest provinces of Shaanxi, Ningxia, and Gansu. We conducted a regional comparative analysis using cross-sectional data to assess the impact of the policy during its initial implementation phase from 1999 to 2007. Relying upon both qualitative and quantitative data, we found that overall the GWDS has had a positive impact on these northwestern provinces, specifically on education, standards of living, rural household incomes, and structural changes from primary to secondary industries. However, our research also revealed deficiencies in water resource management, disparities in the allocation of investment across and within provinces, and other shortcomings of the GWDS. The results of this research will be a valuable contribution to the ongoing discussions about the efficiencies of regional development strategies, and will be especially important in understanding the importance of China’s northwest in promoting the country’s overall growth.

II. Introduction

Over the past three decades, the People’s Republic of China has experienced extraordinary and transformative economic growth. However, this prosperity and increased welfare has not been evenly distributed throughout the country. A 1999 evaluation of the Human Development Index (HDI) in China revealed that all eastern provinces in China had a high level of .711 to .853, central provinces had a middle ranking of .673 to .732, and western provinces had the lowest ranking of .521 to .751 on the HDI scale (Hu 2007). In part, this is due to the post-Maoist development strategy which focused preferential policies on the eastern coastal region (Fan 1997). The eastern provinces were given priority due to perceived geographical comparative advantages, notably their proximity to ocean trade routes.

In 1999 Chinese policymakers signaled a significant departure from prior regional development policies by announcing Xibu Da Kaifa, also known as the Great Western Development Strategy (GWDS). The strategy was designed to confront economic and ecological concerns as well as issues of human capital in the western provinces. Specifically, policymakers sought to cultivate a good investment environment, develop a strong labor force, and promote conservation policies. The Great Western Development Strategy aimed to resolve regional disparities through investment in infrastructure, conservation programs, and health and social institutions. Encompassing over 17 provinces and totaling over a trillion yuan in expenditures, this strategy reflects both depth of application and breadth of focus (Goodman 2004).

The correlation between infrastructure and development has been well-established in previous economic literature, and has played a key role in the rationale behind the GWDS. However, the impacts of infrastructure on the environment and specifically on northwestern China’s provinces are not fully understood. Therefore, the purpose of this study was to examine the effectiveness of the GWDS investment in infrastructure and its ramifications for the environment, social wellbeing, and economy of the northwest. Our research encompassed qualitative as well as quantitative analysis in order to develop a more comprehensive understanding of infrastructure’s role in promoting sustainable development.

The following section will present background information on the northwest provinces as well as a thorough review of previous literature that relates to our topic. The second segment of this paper will explain our hypotheses and quantitative and qualitative methodologies. Finally, we will reveal our findings, present our interpretations of the results, and draw our conclusions.

III. Background

As our research focused on comparing development in China’s northwest to conditions throughout the country, this section will provide an important context for understanding China’s three northwestern provinces: Gansu, Shaanxi, and Ningxia Autonomous Region.

Gansu is one of China’s slowest growing provinces, but paradoxically has received one of the largest amounts of investment from the GWDS (Wei et al 2006). The main reason behind Gansu’s low growth rate is the economic domination of State-Owned Enterprises (SOE’s), which represent Gansu’s largest economic sector and which have a very low growth rate of 2.94% (Wei et al 2006). In addition, Gansu’s isolated location in China’s interior limits potential for foreign investment and is the reason why Gansu has the fifth lowest amount of Foreign Direct Investment (Wei et al 2006). Gansu is also troubled by a lack of human capital, a shortage of high-skilled jobs for educated individuals, and high levels of inequality (Wei et al 2006).

Like Gansu and many other western provinces, Shaanxi was left behind in the 1970’s when China’s growth first took off (Vermeer 2004). However, Shaanxi is rich in natural resources such as coal and natural gas and these comparative advantages allowed the energy industry in Shaanxi to become one of the province’s main instigators of growth (Vermeer 2004). In addition to extractive industries, Shaanxi is quickly developing tertiary tourism and information technology industries (Vermeer 2004). Government investment in infrastructure, subsidies, irrigation, and development of high-value added crops has helped improve agriculture in Shaanxi, but inequalities continue to exist within the province between rural and urban areas (Vermeer 2004).

Unlike the other northwestern provinces, Ningxia Autonomous Region contains a large minority population, the Hui Muslims. Historically, the Hui have been both economically and socially disadvantaged in comparison to the majority Han population and currently the majority of the Hui people live in the poorest areas of the autonomous region and generally have low literacy rates, especially among the female population (Ho 2003). Ningxia faces many environmental challenges including soil erosion, desertification, and salinization (Merkle 2003). As a result, arable land is of poor quality and agricultural returns are low (Merkle 2003). Even with its salient environmental concerns, Ningxia has seen a dramatic rise in the standard of living since the establishment of GWDS. Rural income more than doubled between 1999 and 2007. In addition, Ningxia experienced increases in employment and output growth in manufacturing and service industries. Even though Ningxia is moving away from primary industry, a majority of the population continues to be employed in the sector.

(majority of the paper removed - email me if you are interested in reading the whole thing)

VIII. Conclusion and Policy Recommendations

In researching the impacts of the GWDS in Gansu, Shaanxi, and Ningxia, we observed numerous economic, social, and environmental trends. Overall we found that infrastructure development has had a positive impact on the rural villages we visited. Roads led to more regional and international trade, opened up access to and created new markets, and as a result led to an increase in incomes and production. Electrical, water, and telecommunications infrastructure helped to dramatically improve residents’ standard of living. All types of infrastructure development created better environments for enterprises and industries. However, in recognizing the many positive impacts of the GWDS, we also became aware of several issues that should be addressed by Chinese policymakers and the second phase of this strategy’s implementation.

Western China in general suffers from a lack of human capital investment and a shortage of higher education resources. This deficiency impacts employment opportunities, the willingness and ability of high-tech industries to move into the west, and migration patterns. The irony of migration is that on one hand it adds to individual village and household incomes, but on the other significantly limits the potential of a village to develop as it represents a loss of educated and skilled labor. In addition to having a mostly untapped labor population, the west enjoys rich natural resources that could be utilized more efficiently to stimulate growth. Rather than being extracted and exported out of the west to be processed elsewhere, there is great potential for secondary industries to prosper in the west and make use of this abundance of natural resources, as well as utilizing the large low-wage labor population. While the west enjoys the comparative advantages of natural resources, italso experiences the geographical disadvantages of being a mostly arid region. Therefore, future development must take into consideration how water resource issues will be managed and overcome. Given the fragile nature of the its ecology, sustainability and the quality of growth must become priorities in the next phase of the west’s regional development.

As illustrated by our descriptive statistics, the western region has experienced great change, especially in terms of economic growth. However, the data also reveal sizeable disparities even within the west and more specifically between the three northwestern provinces. While Shaanxi and Ningxia are leading western provinces, Gansu continues to lag behind in terms of economic development. Furthermore, our statistical analysis demonstrated that growth has been unequal within provinces, specifically between urban and rural areas. Our quantitative findings illustrated that while growth has been achieved in many indicators of development, rates of change have not always been significant. This is likely due to the fact that the GWDS promotes policies and changes that have long-term impacts, rather than quickly-realized effects. Therefore, we expect to see more significant levels of growth in the next ten years of the GWDS.

The Great Western Development Strategy will face numerous challenges in the next ten years of the program. However, there have also been many noteworthy successes. Living standards have increased markedly since the 1990’s for millions of villagers. Entrepreneurship is now a possibility for even poor rural families. The Great Western Development Strategy is a massive program, totaling trillions of RMB in investments, affecting millions of people, and covering thousands of miles. As a result, there is still much to be learned about the policy’s diversity of impacts on rural societies. We believe that our findings have helped expand the understanding of China’s ever-evolving regional development strategy and have highlighted the significant role the GWDS is playing in encouraging China’s overall growth.

[1] We would like to thank the National Science Foundation for making our research possible through its generous funding. In addition, we appreciate the work of Professor James Cook in acquiring the NSF grant that has funded our project and in helping to organize the field research. Dr. Shi of Shaanxi Northwest University and his colleagues were instrumental in helping us conduct our research, and we are very grateful for their contributions. Dr. Timothy Dittmer should also be recognized for his contribution to our statistical analysis. Finally, we would especially like to thank our mentors Dr. Xun Pomponio and Dr. Richard Mark for all of their advice and support.

China, here I come!

It has been way too long before I posted anything to this blog. Life has gotten the best of me. I will be graduating in three days (wahoo!) from Central Washington University with a B.S. in Economics, a B.A. in Russian Language, a minor in Mathematics and a minor in Political Science. In the fall I will be starting a M.S. program in Resource and Environment Management. I hope to eventually go on to get a PHD in Environmental Economics.

This summer I will be participating in NSF's "Great Western Development, Rural Peasants, and Water Policy Across China’s Loess Plateau: A National Science Foundation Research Experience for Undergraduates" (technically I graduate in August, though this is my last quarter as an undergraduate) Information can be found here: http://www.cwu.edu/~studyabroad/documents/NSF%202010%20program%20information%20%28email%20version%29.pdf . We will research to find answers to the following questions:

"First, how has the massive economic development initiated by GWDS, the largest regional
economic development program in world history, affected water resource management in
Northwest China? Second, how have local users, largely rural, marginalized peasants,
reacted to and employed their own creative strategies to reformulate central policy
according to their own needs? Finally, what are the specific environmental impacts of rapid
economic and infrastructure development?"

I am unbelievably lucky... and I am still in disbelief that I am going! I will be keeping my blog updated on this amazing adventure :)

Incentive Based vs Standard Policies on Pollution Abatement

There are two classes of incentive based policies: taxes and tradable emission permits (discussed at a later date). The advantages of a tax is that they are always cost effective, provide incentive for polluting firms to invest in abatement technology, internalizes the externality of pollution and payments generate public revenue that can be used to mitigate the negitive effects of pollution. Problems with taxrs are that they might be implimented for reasons other than protection of the enviroment, payments are reductions in revenue of the firm (which could cause some firms to leave the industry), the payments might exceed enviromental damage, difficult to impliment, monitor and enforce, pollitically unpopular, uniform taxes not appropriate and inflation affects control.

Standards for polution (ie, only allowed to pollute a certain amount) are, on the other hand, politically popular, generally not efficient or cost effective, impose high informal costs and surpress technological innovation.

A tax (incentive based instrument) gives the company flexibility to figure out for themselves how much to abate. They would always have a financial incentive to abate more at any level of pollution because this would lower the amount of tax that they would pay. The company would always strive for better technology to be able to save more on their taxes. With a standard for abatement the company would improve abatement technology up to the standard and then stop – they would have no further incentive at that point. They would actually have disincentive to create better technology because then, if that technology becomes the market norm, the standard might be lowered and they would lose some flexibility. With a tax, in contrast, the government would not have incentive to increase the emissions charge as abatement goes up, the revenue from taxes would go down, but so would environmental damage – which is the goal of the tax in the first place (to offset the externality).

To find the efficient level of abatement it is necessary to know the marginal abatement costs (the cost of abating one more unit at any given level of abatement) and the marginal social benefit of abatement (the inverse of the damage of pollution function). With the MAC (marginal abatement cost function) of each company you can calculate the MAC of the market. The efficient level of abatement is where the two functions are equal (MAC[market]=MBA[society]). The most efficient level of abatement for each firm would be found by dividing the total efficient abatement level between the firms such that each firm spends the same amount to abate the last unit of abatement.
I am assuming that you can calculate the marginal abatement costs and the marginal benefit of abatement. I am also assuming that the enforcement costs are negligible or zero. The pollution must also be a point source pollutant. At the efficient level of abatement the benefits and the cost of the abatement are equal. If you abated more it would not be worth it and the cost would be too high in comparison to the benefits; This could push firms out of the market even. However, if you are below the efficient amount of abatement then you would not be abating enough; the cost to society of that pollution is higher than the benefit coming from causing the pollution, this is also not ideal.

In a condition of uncertainty you might not be able to find the efficient level of abatement, but you want to weigh your risks to find out what is the safest choice – to have too high of a standard or tax rate (which could harm business and cause firms to even leave the market) or an abatement level that is too low (too high levels of environmental damage). If you want to make sure that you abate a certain amount, for a certain level of environmental protection, a "command and control" instrument would be best. However, if you want to be sure not to harm business too much, then a market or incentive based instrument would be best.

The US prison system

Our prison system is the most compassionless and un-spiritual place in the US. I feel that the way we deal with our "problem people" is barbaric. Most people in prison, once they are released, return. There is no rehabilitation, only breeding of more hardened criminals.
"The model that permeates our lives is retribution. Someone is to blame, and someone must pay. Our prison system is the most blatant example of a complete and utter lack of compassion. Within the last several years, even the term 'correctional institution', which hinted at some attention to rehabilitation, has been officially dropped. Now our prison system doesn't even pretend the least interest in helping or supporting inmates. They did something wrong; they pay the price. It's only fair. Each individual is to blame....(as if he or she didn't emerge out of a dysfunctional subculture or family, created by overwhelming social and economic inequalities), and when you screw up, these are the consequences: an even worse, appallingly dysfunctional society (prison), fully supported by tax dollars. 'in god we trust?; not in our prison system. In our ability to be as cruel and vindictive as possible we trust." (from "Why Talking Is Not Enough" By: Susan Page)
In prison people are abused, raped and denied basic human rights - yet the public couldn't care less. We figure that they did their crime, they are wrong, and must pay the price. Why did they commit their crime in the first place? I strongly feel that more crime would be prevented, not by cracking down on crime, but by helping out impoverished, abused and mistreated people in our country.
Polititians want to be tougher on crime, it is unpolitically-correct to protect the rights of criminals - who, by the way, have lost thier right to vote. Prison gards are unionized and want to protect thier jobs. The system is self perpetuating and sickening... and people will just sit by and watch.

One never stops learning... until they die

I live by the principle that you never stop learning throughout life. I am never one to believe that I know it all. I know far too much to think that I know everything. I believe that although one should be adamant in their beliefs and have a strong moral reserve to stand up for them, only a fool sticks to a belief out of stubbornness. I am constantly seeking new information, and I feel that my beliefs and opinions are made out of research and thought, the more thought and research the more I have faith in it, sure, but I also am aware that I could be wrong.
I am currently studying economics, yet I find myself a little overwhelmed at discussing economics and politics with people. My boyfriend suggested I start a blog about my thoughts on economics, and I said, "but I don't know anything about economics!" It seems the more you learn the more you realize that there is too much out there to learn to ever know everything. My thoughts were foolish, I realized, so I decided that I should try and write about my ideas. Here goes! :)