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Agri-environmental Regulation on the Back of a Data Envelopment Analysis

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  • White, Benedict
  • Raguragavan, Jananee
  • Chambers, Robert G.

Abstract

A land retirement policy whereby land is taken out of agriculture and converted to natural vegetation or forestry has the potential to reduce environmental damage related to dryland salinity in Western Australia. This paper uses some recent results in the theory of directional distance functions (Chambers and Fare, 2004) to analyse alternative policy designs for a land retirement scheme. The results indicate that a fixed price scheme is inefficient compared with a first-best solution, but performs adequately. A scheme requiring a fixed proportion of area retired by all producers is inefficient. A separating solution, based on mechanism design, gives a small but significant increase in welfare compared to a fixed price scheme.

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Bibliographic Info

Paper provided by Agricultural Economics Society in its series 81st Annual Conference, April 2-4, 2007, Reading University with number 7963.

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Date of creation: 2007
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Handle: RePEc:ags:aes007:7963

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Keywords: Agri-environmental policy; distance functions; efficiency; mechanism design; Environmental Economics and Policy; Q12;

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