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Agri-Environmental Program Compliance in a Heterogeneous Landscape

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Author Info
Lankoski, Jussi
Lichtenberg, Erik
Ollikainen, Markku

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Abstract

Heterogeneity of agricultural landscapes may necessitate the use of spatially targeted instrument combinations to implement the social optimum. But compliance with these policies may require costly enforcement. This paper examines the design of agri-environmental policies featuring two of the most commonly used instruments, reductions in fertilizer application rates and installation of riparian buffers. While compliance with buffer strip requirements is verifiable at negligible cost, fertilizer application is only verifiable through costly monitoring. We derive optimal subsidies for fertilizer reduction and buffer strip set-asides and enforcement strategies for the cases of low and excessive monitoring costs. An empirical simulation model suggests that enforceable policies can come close to replicating socially optimal crop production, nitrogen runoff, and overall welfare without requiring increases in overall subsidy expenditures, at least under conditions characteristic of Scandinavia. Sensitivity analysis suggests that these conclusions may carry over to areas with higher overall land quality as well.

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Publisher Info
Paper provided by University of Maryland, Department of Agricultural and Resource Economics in its series Working Papers with number 37797.

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Date of creation: 2008
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Handle: RePEc:ags:umdrwp:37797

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Related research
Keywords: nutrient runoff; monitoring; enforcement; Agricultural and Food Policy; Environmental Economics and Policy; Q15; Q18; H23;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. A. Mitchell Polinsky & Steven Shavell, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March. [Downloadable!] (restricted)
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  2. Malik, Arun S, 1992. "Enforcement Costs and the Choice of Policy Instruments for Controlling Pollution," Economic Inquiry, Oxford University Press, vol. 30(4), pages 714-21, October.
  3. Downing, Paul B. & Watson, William Jr., 1974. "The economics of enforcing air pollution controls," Journal of Environmental Economics and Management, Elsevier, vol. 1(3), pages 219-236, November. [Downloadable!] (restricted)
  4. Lichtenberg, Erik, 2002. "Agriculture and the environment," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 23, pages 1249-1313 Elsevier. [Downloadable!] (restricted)
    Other versions:
  5. Sandra Rousseau & Stef Proost, 2005. "Comparing Environmental Policy Instruments in the Presence of Imperfect Compliance – A Case Study," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(3), pages 337-365, November. [Downloadable!] (restricted)
  6. Lichtenberg, Erik, 2004. "Are Green Payments Good for the Environment?," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 33(1), April. [Downloadable!]
  7. Jussi Lankoski & Markku Ollikainen, 2003. "Agri-environmental externalities: a framework for designing targeted policies," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 30(1), pages 51-75, March.
  8. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169. [Downloadable!] (restricted)
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  9. Per Kristian Rørstad & Arild Vatn & Valborg Kvakkestad, 2007. "Why do transaction costs of agricultural policies vary?," Agricultural Economics, International Association of Agricultural Economists, vol. 36(1), pages 1-11, 01. [Downloadable!] (restricted)
  10. Chongwoo Choe & Iain Fraser, 1999. "Compliance Monitoring and Agri-Environmental Policy," Journal of Agricultural Economics, Blackwell Publishing, vol. 50(3), pages 468-487. [Downloadable!] (restricted)
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  11. Harford, Jon D., 1978. "Firm behavior under imperfectly enforceable pollution standards and taxes," Journal of Environmental Economics and Management, Elsevier, vol. 5(1), pages 26-43, March. [Downloadable!] (restricted)
  12. Athanasios Kampas & Ben White, 2004. "Administrative Costs and Instrument Choice for Stochastic Non-point Source Pollutants," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 27(2), pages 109-133, February. [Downloadable!] (restricted)
  13. Rob Fraser, 2002. "Moral Hazard and Risk Management in Agri-environmental Policy," Journal of Agricultural Economics, Blackwell Publishing, vol. 53(3), pages 475-487. [Downloadable!] (restricted)
  14. Rob Fraser, 2004. "On the Use of Targeting to Reduce Moral Hazard in Agri-environmental Schemes," Journal of Agricultural Economics, Blackwell Publishing, vol. 55(3), pages 525-540. [Downloadable!] (restricted)
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  1. Lankoski, J. & Lichtenberg, E. & Ollikainen, M., 2008. "Agri-environmental program compliance under heterogeneous conditions," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44381, European Association of Agricultural Economists. [Downloadable!]
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