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Agri-environmental Regulation on the Back of a Data Envelopment Analysis

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  • White, Benedict
  • Raguragavan, Jananee
  • Chambers, Robert G.

Abstract

A land retirement policy whereby land is taken out of agriculture and converted to natural vegetation or forestry has the potential to reduce environmental damage related to dryland salinity in Western Australia. This paper uses some recent results in the theory of directional distance functions (Chambers and Fare, 2004) to analyse alternative policy designs for a land retirement scheme. The results indicate that a fixed price scheme is inefficient compared with a first-best solution, but performs adequately. A scheme requiring a fixed proportion of area retired by all producers is inefficient. A separating solution, based on mechanism design, gives a small but significant increase in welfare compared to a fixed price scheme.

Suggested Citation

  • White, Benedict & Raguragavan, Jananee & Chambers, Robert G., 2007. "Agri-environmental Regulation on the Back of a Data Envelopment Analysis," 81st Annual Conference, April 2-4, 2007, Reading University 7963, Agricultural Economics Society.
  • Handle: RePEc:ags:aes007:7963
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    File URL: http://purl.umn.edu/7963
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    References listed on IDEAS

    as
    1. Andrew Moxey & Ben White & Adam Ozanne, 1999. "Efficient Contract Design for Agri-Environment Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 187-202.
    2. Lau, Lawrence J & Yotopoulos, Pan A, 1971. "A Test for Relative Efficiency and Application to Indian Agriculture," American Economic Review, American Economic Association, vol. 61(1), pages 94-109, March.
    3. Philippe Bontems & Gilles Rotillon & Nadine Turpin, 2005. "Self-Selecting Agri-environmental Policieswith an Application to the Don Watershed," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 31(3), pages 275-301, July.
    4. Chambers, Robert G. & Fare, Rolf, 2004. "Additive decomposition of profit efficiency," Economics Letters, Elsevier, vol. 84(3), pages 329-334, September.
    5. Chambers, Robert G, 1989. "Recent Developments in Production Economics," The Economic Record, The Economic Society of Australia, vol. 65(190), pages 243-264, September.
    6. Robert G. Chambers, 1992. "On the Design of Agricultural Policy Mechanisms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 646-654.
    7. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
    8. JunJie Wu & Bruce A. Babcock, 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 935-945.
    9. Chambers, Robert G., 2002. "Information, incentives, and the design of agricultural policies," Handbook of Agricultural Economics,in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 34, pages 1751-1825 Elsevier.
    10. Bourgeon, Jean-Marc & Jayet, Pierre-Alain & Picard, Pierre, 1995. "An incentive approach to land set-aside programs," European Economic Review, Elsevier, vol. 39(8), pages 1487-1509, October.
    11. Robert G. Chambers, 2002. "Exact nonradial input, output, and productivity measurement," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(4), pages 751-765.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agri-environmental policy; distance functions; efficiency; mechanism design; Environmental Economics and Policy; Q12;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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