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Empirical evaluation of nonpoint pollution policies under agent heterogeneity: regulating intensive dairy production in the Waikato region of New Zealand

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  • Graeme J. Doole
  • David J. Pannell

Abstract

Models used for policy evaluation rarely consider firm heterogeneity, despite its importance for instrument design. This study considers agent heterogeneity explicitly in the evaluation of policies for nonpoint pollution control through the integration of decomposition and calibration procedures for programming models. The application concerns the regulation of nitrate leaching from intensive dairy production in the Waikato region of New Zealand. Failing to represent firm heterogeneity leads to widely different estimates of mitigation costs, relative to where heterogeneity is considered. Variation in baseline emissions and the slopes of abatement cost curves between firms renders a differentiated policy less costly than a uniform standard. However, the relative values of these policies are not broadly different, as firms required to do the most abatement – intensive farms with large baseline pollutant loads – can do so more cheaply, on average.
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Suggested Citation

  • Graeme J. Doole & David J. Pannell, 2012. "Empirical evaluation of nonpoint pollution policies under agent heterogeneity: regulating intensive dairy production in the Waikato region of New Zealand," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(1), pages 82-101, January.
  • Handle: RePEc:bla:ajarec:v:56:y:2012:i:1:p:82-101
    DOI: j.1467-8489.2011.00565.x
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    File URL: http://hdl.handle.net/10.1111/j.1467-8489.2011.00565.x
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    References listed on IDEAS

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    1. Newell, Richard G & Stavins, Robert N, 2003. "Cost Heterogeneity and the Potential Savings from Market-Based Policies," Journal of Regulatory Economics, Springer, vol. 23(1), pages 43-59, January.
    2. Thomas Heckelei & Hendrik Wolff, 2003. "Estimation of constrained optimisation models for agricultural supply analysis based on generalised maximum entropy," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(1), pages 27-50, March.
    3. Henseler, Martin & Wirsig, Alexander & Herrmann, Sylvia & Krimly, Tatjana & Dabbert, Stephan, 2009. "Modeling the impact of global change on regional agricultural land use through an activity-based non-linear programming approach," Agricultural Systems, Elsevier, vol. 100(1-3), pages 31-42, April.
    4. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John, 2004. "Modelling basin level allocation of water in the Murray Darling Basin in a world of uncertainty," Risk and Sustainable Management Group Working Papers 149844, University of Queensland, School of Economics.
    5. McCarl, Bruce A., 1984. "Model Validation: An Overview with some Emphasis on Risk Models," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 52(03), pages 1-21, December.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. 261 – Agricultural water pollution
      by David Pannell in Pannell Discussions on 2014-01-27 21:00:37

    Citations

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    Cited by:

    1. Holland, Luke M. & Doole, Graeme J., 2014. "Implications of fairness for the design of nitrate leaching policy for heterogeneous New Zealand dairy farms," Agricultural Water Management, Elsevier, vol. 132(C), pages 79-88.
    2. Thayalakumaran, T. & Roberts, A. & Beverly, C. & Vigiak, O. & Norng, S. & Stott, K., 2016. "Assessing nitrogen fluxes from dairy farms using a modelling approach: A case study in the Moe River catchment, Victoria, Australia," Agricultural Water Management, Elsevier, vol. 178(C), pages 37-51.
    3. repec:kap:enreec:v:69:y:2018:i:4:d:10.1007_s10640-016-0103-6 is not listed on IDEAS
    4. repec:ags:aareaj:262411 is not listed on IDEAS
    5. Jo Hendy & Levente Timar & Dominic White, 2018. "Land-use modelling in New Zealand: current practice and future needs," Working Papers 18_16, Motu Economic and Public Policy Research.
    6. Rolfe, John & Windle, Jill, 2016. "Estimating supply functions for agri-environmental schemes: Water quality and the Great Barrier Reef," 2016 Conference (60th), February 2-5, 2016, Canberra, Australia 235510, Australian Agricultural and Resource Economics Society.
    7. Marsh, Dan & Tucker, Steve & Doole, Graeme, 2014. "An experimental approach to assessment of trading and allocation mechanisms for nutrient trading," 2014 Conference (58th), February 4-7, 2014, Port Macquarie, Australia 167195, Australian Agricultural and Resource Economics Society.
    8. repec:ags:aareaj:260071 is not listed on IDEAS
    9. Stott, Kerry & Doole, Graeme J. & Vigiak, Olga & Kumaran, Thabo & Roberts, Anna M., 2012. "The relationship between farm profit and nitrogen exports on representative dairy farms in the Moe River catchment, Victoria," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124454, Australian Agricultural and Resource Economics Society.

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