Contract Design for the Purchase of Environmental Goods from Agriculture
AbstractAn environmental stewardship program, whereby farmers are paid directly for the environmental goods they provide, is developed by combining the microparameter distribution model with mechanism design principles. The program overcomes the information asymmetry between farmers and governments and accounts for the deadweight losses from distortionary taxes. The characteristics of optimal input and payment schedules of the program are derived. These optimal schedules are determined by the tradeoffs between farming profits, environmental benefits, and deadweight losses from taxes, and are second-best except under restrictive conditions on deadweight losses from taxes and on the marginal product of inputs and marginal pollution costs. Copyright 1996, Oxford University Press.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1050.
Date of creation: 01 Nov 1996
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Publication status: Published in American Journal of Agricultural Economics, November 1996, vol. 78 no. 4, pp. 935-945
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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Other versions of this item:
- JunJie Wu & Bruce A. Babcock, 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 935-945.
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