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Cost Sharing, Transaction Costs, And Conservation

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  • Lichtenberg, Erik
  • Smith-Ramirez, Ricardo

Abstract

Conservation subsidies may be awarded for otherwise profitable projects, in which case they do not improve environmental quality. We show that transaction costs involved in such subsidy programs may induce farmers to reduce the size and scope of conservation projects. An empirical study shows that cost sharing in Maryland has resulted in simpler projects that provide no greater environmental protection. Water quality does not appear to be a goal of cost sharing; farm productivity and political considerations do.

Suggested Citation

  • Lichtenberg, Erik & Smith-Ramirez, Ricardo, 2003. "Cost Sharing, Transaction Costs, And Conservation," 2003 Annual meeting, July 27-30, Montreal, Canada 22141, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea03:22141
    DOI: 10.22004/ag.econ.22141
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    References listed on IDEAS

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    1. Guilherme S. Bastos & Erik Lichtenberg, 2001. "Priorities in Cost Sharing for Soil and Water Conservation: A Revealed Preference Study," Land Economics, University of Wisconsin Press, vol. 77(4), pages 533-547.
    2. Katherine Reichelderfer & William G. Boggess, 1988. "Government Decision Making and Program Performance: The Case of the Conservation Reserve Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(1), pages 1-11.
    3. Peter Feather & Daniel Hellerstein, 1997. "Calibrating Benefit Function Transfer to Assess the Conservation Reserve Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 151-162.
    4. Norris, Patricia E. & Batie, Sandra S., 1987. "Virginia Farmers' Soil Conservation Decisions: An Application Of Tobit Analysis," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(1), pages 1-12, July.
    5. Christine A. Ervin & David E. Ervin, 1982. "Factors Affecting the Use of Soil Conservation Practices: Hypotheses, Evidence, and Policy Implications," Land Economics, University of Wisconsin Press, vol. 58(3), pages 277-292.
    6. Cynthia J. Nickerson & Lori Lynch, 2001. "The Effect of Farmland Preservation Programs on Farmland Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(2), pages 341-351.
    7. Shoemaker, Robbin A. & Malik, Arun S., 1993. "Optimal Cost-Sharing Programs to Reduce Agricultural Pollution," Technical Bulletins 157045, United States Department of Agriculture, Economic Research Service.
    8. Cooper, Joseph C., 1997. "Combining Actual And Contingent Behavior Data To Model Farmer Adoption Of Water Quality Protection Practices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(1), pages 1-14, July.
    9. Lichtenberg, Erik, 2002. "Agriculture and the environment," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 23, pages 1249-1313, Elsevier.
    10. Norris, Patricia E. & Batie, Sandra S., 1987. "Virginia Farmers' Soil Conservation Decisions: An Application of Tobit Analysis," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 19(1), pages 79-90, July.
    11. Magleby, Richard & Sandretto, Carmen & Crosswhite, William & Osborn, C. Tim, 1995. "Soil Erosion and Conservation in the United States: An Overview," Agricultural Information Bulletins 309733, United States Department of Agriculture, Economic Research Service.
    12. Babcock, Bruce A. & Lakshminarayan, P. G. & Wu, J. & Zilberman, David, 1997. "Targeting Tools for the Purchase of Environmental Amenities," Staff General Research Papers Archive 5220, Iowa State University, Department of Economics.
    13. Margriet F. Caswell & David Zilberman, 1986. "The Effects of Well Depth and Land Quality on the Choice of Irrigation Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 798-811.
    14. Erik Lichtenberg, 1989. "Land Quality, Irrigation Development, and Cropping Patterns in the Northern High Plains," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(1), pages 187-194.
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    Cited by:

    1. Anderson, John D. & Parkhurst, Gregory M., 2004. "Economic Comparison of Commodity and Conservation Program Benefits: An Example from the Mississippi Delta," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(2), pages 415-424, August.
    2. Lichtenberg, Erik, 2004. "Some Hard Truths About Agriculture and the Environment," Agricultural and Resource Economics Review, Cambridge University Press, vol. 33(1), pages 24-33, April.

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