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Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution

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  • Wu, JunJie
  • Babcock, Bruce A.

Abstract

Because it is difficult to monitor emissions and to implement differential taxes and standards, uniform taxes and standards on agricultural chemical use are often proposed and used to control nonpoint-source pollution. This article analyzes the relative efficiency of these uniform instruments in the presence of spatial heterogeneity. We show that the relative slopes of the marginal pollution cost and marginal profit of chemical use are only one of the factors that affect the relative efficiency. Other factors include correlation between marginal pollution costs and marginal profits and the slope and variability of marginal profits. In addition, a uniform tax may result in some farmers not using the chemical, and a uniform standard may have no effect on low-input land. We show empirically that the presence of corner solutions can reverse a conventional finding of tax or standard superiority based on the relative-slop rule.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1012.

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Date of creation: 01 Jan 2001
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Publication status: Published in Environmental and Resource Economics 2001, vol. 18, pp. 173-192
Handle: RePEc:isu:genres:1012

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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  1. Stavins, Robert N., 1996. "Correlated Uncertainty and Policy Instrument Choice," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 218-232, March.
  2. Malcomson, James M, 1978. "Prices vs. Quantities: A Critical Note on the Use of Approximations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 45(1), pages 203-07, February.
  3. Wu, JunJie & Mapp, Harry P., Jr. & Bernardo, Daniel J., 1994. "A Dynamic Analysis Of The Impact Of Water Quality Policies On Irrigation Investment And Crop Choice Decisions," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, Southern Agricultural Economics Association, vol. 26(02), December.
  4. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 113-126, March.
  5. Thomas W. Hertel & Kyle Stiegert & Harry Vroomen, 1996. "Nitrogen-Land Substitution in Corn Production: A Reconciliation of Aggregate and Firm-Level Evidence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 78(1), pages 30-40.
  6. Kwerel, Evan, 1977. "To Tell the Truth: Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(3), pages 595-601, October.
  7. Xepapadeas, A. P., 1995. "Observability and choice of instrument mix in the control of externalities," Journal of Public Economics, Elsevier, Elsevier, vol. 56(3), pages 485-498, March.
  8. Bouzaher, Aziz & Lakshminarayan, P. G. & Cabe, Richard & Carriquiry, Alicia L. & Gassman, Philip W. & Shogren, Jason F., 1993. "Metamodels and Nonpoint Pollution Policy in Agriculture," Staff General Research Papers, Iowa State University, Department of Economics 531, Iowa State University, Department of Economics.
  9. Dasgupta, Partha & Hammond, Peter & Maskin, Eric, 1980. "On Imperfect Information and Optimal Pollution Control," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(5), pages 857-60, October.
  10. Babcock, Bruce A. & Blackmer, Alfred M., 1992. "The Value Of Reducing Temporal Input Nonuniformities," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 17(02), December.
  11. Fishelson, Gideon, 1976. "Emission control policies under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 189-197, October.
  12. Adar, Zvi & Griffin, James M., 1976. "Uncertainty and the choice of pollution control instruments," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 178-188, October.
  13. Yohe, Gary W., 1976. "Substitution and the control of pollution : A comparison of effluent charges and quantity standards under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 3(4), pages 312-324, December.
  14. Taylor, Michael L. & Adams, Richard M. & Miller, Stanley F., 1992. "Farm-Level Response To Agricultural Effluent Control Strategies: The Case Of The Willamette Valley," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 17(01), July.
  15. Wu, JunJie & Babcock, Bruce A., 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," Staff General Research Papers, Iowa State University, Department of Economics 1050, Iowa State University, Department of Economics.
  16. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
  17. Babcock, Bruce A. & Blackmer, A. M., 1992. "Value of Reducing Temporal Input Nonuniformities (The)," Staff General Research Papers, Iowa State University, Department of Economics 10587, Iowa State University, Department of Economics.
  18. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, Elsevier, vol. 5(3-4), pages 193-208.
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Citations

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Cited by:
  1. Joan Canton & Stephane De Cara & Pierre-Alain Jayet, 2009. "Agri-environmental schemes: Adverse selection, information structure and delegation," Working Papers 31130, Institut National de la Recherche Agronomique, France.
  2. Constadina Passa & Anastasios Xepapadeas, 2007. "Modelling of Agricultural Behavior under the CAP Regime: Policy Effectiveness and Design," Working Papers, University of Crete, Department of Economics 0819, University of Crete, Department of Economics, revised 01 Jul 2008.
  3. Moritz Rohling & Markus Ohndorf, 2010. "Prices vs. Quantities with Fiscal Cushioning," IED Working paper, IED Institute for Environmental Decisions, ETH Zurich 10-11, IED Institute for Environmental Decisions, ETH Zurich.
  4. Constadina Passa & Anastasios Xepapadeas, 2007. "Modelling of Agricultural Behavior under the CAP Regime: Assessment of Environmental Impacts and Policy Effectiveness," Working Papers, University of Crete, Department of Economics 0818, University of Crete, Department of Economics, revised 01 Jul 2008.
  5. Ashar Aftab & Giovanni Baiocchi & Nick Hanley, 2009. "Integrated Regulation of Nonpoint Pollution: Combining Managerial Controls and Economic Instruments under Multiple Environmental Targets," Working Papers 2009_03, Durham University Business School.
  6. Brock, William & Xepapadeas, Anastasios, 2008. "Pattern Formation, Spatial Externalities and Regulation in Coupled Economic-Ecological Systems," MPRA Paper 9105, University Library of Munich, Germany.
  7. Petsakos, Athanasios & Jayet, Pierre-Alain, 2010. "Evaluating the efficiency of a N-input tax under different policy scenarios at different scales," 120th Seminar, September 2-4, 2010, Chania, Crete, European Association of Agricultural Economists 109397, European Association of Agricultural Economists.
  8. Helin, Janne, 2009. "Does geography matter in nutrient abatement? Bioeconomic model of heteregoneus farm nutrient loads," 2009 Conference, August 16-22, 2009, Beijing, China, International Association of Agricultural Economists 51693, International Association of Agricultural Economists.
  9. 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, European Association of Environmental and Resource Economists, vol. 27(2), pages 109-133, February.
  10. Boyd, James, 2003. "Water Pollution Taxes: A Good Idea Doomed to Failure?," Discussion Papers, Resources For the Future dp-03-20, Resources For the Future.

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