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Designing Regulatory Policies for Complex Externalities: The Case of Agricultural Pollution

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Author Info

  • Athanasios Kampas

    ()
    (Department of Agricultural Economics & Development, Agricultural University of Athens, Iera Odos 75, 11855 Athens, Greece)

  • Katerina Melfou

    ()
    (Department of Agricultural Products Marketing and Quality Control, Technological Institute of Western Macedonia, 53100 Florina, Greece)

  • Ashar Aftab

    ()
    (Durham Business School, University of Durham, Mill Hill Lane, Durham City, United Kingdom DH1 3LB)

Abstract

The paper examines the issue of designing and implementing policy measures to control complex agricultural externalities. Complex externalities refer to the situation where a production (firm on firm) externality coexists with a detrimental (firm on society) externality. The paper identifies the optimal solution for complex externalities, which is a combination of spatially differentiated taxes. However, severe information requirements render the first-best policy infeasible. Finally, a likely voluntary scheme based on firm self-report is examined which may enforce firm compliance with the optimal policy.

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File URL: http://aoatools.aua.gr/RePEc/aua/wpaper/files/2012-6_melfou.pdf
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Bibliographic Info

Paper provided by Agricultural University of Athens, Department Of Agricultural Economics in its series Working Papers with number 2012-6.

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Length: 19 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:aua:wpaper:2012-6

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Web page: http://www.aoa.aua.gr
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Related research

Keywords: complex externalities; state dependent linear ambient tax; voluntary schemes; moral hazard; incentive compatibility; spatial externalities;

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References

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  1. Grimm, Sadi S. & Paris, Quirino & Williams, William A., 1987. "A Von Liebig Model For Water And Nitrogen Crop Response," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 12(02), December.
  2. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, April.
  3. Khanna, Madhu, 2001. " Non-mandatory Approaches to Environmental Protection," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 291-324, July.
  4. Kathleen Segerson & JunJie Wu, 2003. "Nonpoint Pollution Control: Inducing First-best Outcomes through the Use of Threats," Working papers 2003-03, University of Connecticut, Department of Economics, revised Aug 2004.
  5. Tietenberg, T. H., 1974. "Derived decision rules for pollution control in a general equilibrium space economy," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 3-16, May.
  6. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, April.
  7. Lars Hansen, 1998. "A Damage Based Tax Mechanism for Regulation of Non-Point Emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(1), pages 99-112, July.
  8. Horan, Richard D. & Shortle, James S. & Abler, David G., 1998. "Ambient Taxes When Polluters Have Multiple Choices," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 186-199, September.
  9. Russell, Clifford S., 2001. "Applying Economics to the Environment," OUP Catalogue, Oxford University Press, number 9780195126846, September.
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