The land allocation game: Externalities and evolutionary competition

This study examines the dynamics and effects of land allocation choices between two different agricultural sectors, A and B, in an evolutionary context and under sectoral interdependencies. The analysis of the proposed model identifies three possible scenarios. In the first scenario, where the expansion of one sector A generates negative effects on both sectors, the outcome may be a “poverty trap”. In the second scenario, a “symbiotic” relationship between sectors exists: profits in sector A (B) increase if sector B (A) expands. This enables a stable and Pareto-superior economic diversification in the regional economy. In the third scenario, a change in land use towards sector A (B) generates negative market externalities on sector B (A); this context favors the specialization in one of the two sectors. For each scenario, policy implications and empirical examples are discussed.