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Efficient Waste? Why Farmers Over-Apply Nutrients and the Implications for Policy Design

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  • Glenn Sheriff

Abstract

Understanding why farmers over-apply fertilizer is essential to designing effective agro-environmental policy. If farmers are simply inefficient, possibilities exist for simultaneously improving farm profits and the environment. If not, costly trade-offs are necessary. This article examines why farmer perceptions of agronomic advice, input substitutability, hidden opportunity costs, uncertainty, and risk aversion can make it economically rational to “waste” fertilizer by applying it above agronomically recommended rates. I use this information to evaluate the relative merits of policy responses such as insurance, education, cost-shares, regulation, taxes, and land retirement. Copyright 2005, Oxford University Press.

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  • Glenn Sheriff, 2005. "Efficient Waste? Why Farmers Over-Apply Nutrients and the Implications for Policy Design," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(4), pages 542-557.
  • Handle: RePEc:oup:revage:v:27:y:2005:i:4:p:542-557
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2005.00263.x
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    1. Oral Capps & Randall A. Kramer, 1985. "Analysis of Food Stamp Participation Using Qualitative Choice Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(1), pages 49-59.
    2. J. William Levedahl, 1995. "How Much Can Informational Outreach Programs Increase Food Stamp Program Participation?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 343-352.
    3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    4. Robinson, Chris, 1989. "The Joint Determination of Union Status and Union Wage Effects: Some Tests of Alternative Models," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 639-667, June.
    5. Heckman, James J, 1990. "Varieties of Selection Bias," American Economic Review, American Economic Association, vol. 80(2), pages 313-318, May.
    6. James Heckman, 1997. "Instrumental Variables: A Study of Implicit Behavioral Assumptions Used in Making Program Evaluations," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 441-462.
    7. McLean-Meyinsse, Patricia E. & Hui, Jianguo & Joseph, Randolph, Jr., 1994. "An Empirical Analysis Of Louisiana Small Farmers' Involvement In The Conservation Reserve Program," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(02), December.
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