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Land-use change is arguably the most pervasive socioeconomic force driving the change and degradation of watershed ecosystems. This paper combines an econometric model of land use choice with three models of watershed health indicators (conventional water pollution, toxic water pollution, and the number of aquatic species at risk) to examine the effects of land use policies on watershed ecosystems through their effect on land use choice. The analysis is conducted using parcel-level data from four western states in the United States (California, Oregon, Washington, and Idaho). Our results suggest that incentive-based local land use policies, such as development impact fees and preferential property taxation, are most effective in improving water quality and decreasing the number of species at risk if targeted according to the current land use mix in the watersheds, while policies that attempt to change the returns to agricultural and forest land, such as reforestation payments or agricultural subsidies, are ineffective in any watershed.


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