Geography Reference
In-Depth Information
products includes a term that discounts future earnings into the present; this for-
ward price is denoted by P
i
;
l
;
m
.
r
1
þ
r
pr
i
;
lm
;
p
¼
P
i
;
l
;
m
G
i
;
l
;
m
ð
2
:
16
Þ
Þ
45
1
ð
where r is the interest rate ($/$ that is unitless).
In order to determine the share of land allocated to each land use type, land use
shares should be calculated numerically, by summing over the land distributions
implied in Eqs. (
2.15
) and (
2.16
). We use instead a reduced-form expression for
land shares that effectively sums over the index p in Eqs. (
2.15
) and (
2.16
) based
on maximizing profit rates, which is at the core of finding land shares that provide
the yields leading to maximum profits.
With the specific assumptions on the functional form of the yield distribution,
the share of land allocated to use i is given by a logit share equation:
pr
i
;
l
;
m
k
P
p
S
i
;
l
;
m
¼
ð
2
:
17
Þ
pr
i
;
l
;
m
;
p
k
where k is a positive parameter that determines the rate that land shares change in
response to a change in profit rate. pr
i
;
l
;
m
is the average profit rate using land use
type i, which is the profit rate evaluated at an average or intrinsic yield, y
i
Land use for a specific purpose is calculated based on this logit-based share of
total land:
Landuse
i
;
l
;
m
¼ S
i
;
l
;
m
Totalland
l
ð
2
:
18
Þ
2.3.2.2 GTAP-AEZ Model
The GTAP-AEZ model is based on the GTAP-E model, which allows for sub-
stitution between capital and energy, and between various fuels in sectoral pro-
duction. Sectors may substitute energy for capital when the rise of energy price is
more than that of the capital rental (Fig.
2.4
). The inter-fuel substitution comprises
of three sub-nestings: (a) electricity versus non-electricity composite; (b) coal
versus non-coal composite; and (c) among oil, gas, and petroleum products. For
example, sectors may substitute coal for non-coal fuel (a composite of oil, gas, and
petroleum products) when coal is more expensive than non-coal fuels.
Based on the RCP 4.5 scenario, potential future economic activities are
assumed. Using this land use model, equilibrium solutions are then found. The
inputs used for the production are capital, labor, land, and other intermediate
inputs. In the GTAP-AEZ model, we recognize a unique production function for
