Local Institutions, Natural Resource Management, and Economic Development: Implication of post-Dust Bowl Institutional Changes on American Agriculture

Abstract

Local institutions are critical in the current environmental and development policy debate. In the face of increasing financial and climatic uncertainty, it is important to understand the capacity of local institutions and collective action in achieving economic development and resilience so that federal, state, and local policies can be designed accordingly. I use historical context from the American farmland conservation experience and digitize a county-level database from the historical maps and annual reports of a federal-backed and longstanding local institution, conservation districts (CD), to understand the formation and implications of local natural resource management institutions in achieving long-term economic development and climate resilience. Using the dataset for the formation period and employing survival models, I find that the likelihood of creating local institutions is higher in counties with higher federal incentives to build knowledge externalities and with higher environmental uncertainties. Furthermore, I find that land grant universities and agrarian contracts influence the formation of conservation districts. Next, to evaluate the impacts of CDs on the local economy and climate resilience, this paper follows CDs from their introduction. Using the difference-in-difference model and instrumental variable method, I show that these institutions help increase farm value and create resilience in the face of future climate shocks.