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Income, Policy, and Water Pollution

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  • Davis, James C.
  • Paudel, Krishna P.
  • Rupasingha, Anil

Abstract

We introduce two new instruments and use a 2SLS within estimator to quantify the role of income and policy in reducing nitrogen pollution in waterbodies. We instrument county income with a shift-share measure and county Environmental Quality Incentive Program (EQIP) investment for water quality-related practices, using an instrument constructed from EQIP practices that are orthogonal to water management. Our results show EQIP investment reduces nitrogen concentrations in waterbodies with an elasticity of - 0.0159, which is statistically significant at the 5% level. We further find a quadratic-shaped relationship between income and nitrogen concentration, with a peak at a natural log per capita county income of $37,798, slightly below the sample mean of $39,735. For counties with above-average incomes, an increase in local income is associated with a decrease in water nitrogen levels, likely due to the community's ability and additional resources to manage and mitigate the impact of local production on water resources.

Suggested Citation

  • Davis, James C. & Paudel, Krishna P. & Rupasingha, Anil, 2025. "Income, Policy, and Water Pollution," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361283, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361283
    DOI: 10.22004/ag.econ.361283
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