Environmental Valuation of Unlabeled Technology Adoption: Theory and Application to Tomato Production and Consumption

The adoption of new technologies by farmers may impact the environment, and hence affect consumer welfare. This channel of impact is seldom assessed in the literature, especially when the production technologies adopted are not labeled on the consumption goods, and as a result are not directly observed by the consumers. We propose a novel theoretical framework where the supply of and demand for an agricultural good are incorporated to estimate consumers’ general and partial equilibrium willingness to pay (WTP) for producers’ unlabeled technology adoption choices. The framework is applied to a sample of 219 tomato farms and a sample of 498 consumers in Maryland, New York and Ohio. Results show that the consumer’s average partial equilibrium marginal WTPs for the tomato grower’s adoption of single-species cover crops, mixed-species cover crops, and environmentally-sound greenhouses range from -1.28 to -1.78 $/lb, 1.36 to 1.76 $/lb, and 1.63 to 1.94 $/lb, respectively, compared to the baseline scenario where cover crops and greenhouses are not adopted. In contrast, the corresponding general equilibrium marginal WTPs are between -1.15 and -0.98 $/lb, between 1.30 and 1.67 $/lb, and between 0.24 and 0.32 $/lb, respectively.