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Designing Regulatory Policies for Complex Externalities: The Case of Agricultural Pollution

Author

Listed:
  • Athanasios Kampas

    () (Department of Agricultural Economics & Development, Agricultural University of Athens, Iera Odos 75, 11855 Athens, Greece)

  • Katerina Melfou

    () (Department of Agricultural Products Marketing and Quality Control, Technological Institute of Western Macedonia, 53100 Florina, Greece)

  • Ashar Aftab

    () (Durham Business School, University of Durham, Mill Hill Lane, Durham City, United Kingdom DH1 3LB)

Abstract

The paper examines the issue of designing and implementing policy measures to control complex agricultural externalities. Complex externalities refer to the situation where a production (firm on firm) externality coexists with a detrimental (firm on society) externality. The paper identifies the optimal solution for complex externalities, which is a combination of spatially differentiated taxes. However, severe information requirements render the first-best policy infeasible. Finally, a likely voluntary scheme based on firm self-report is examined which may enforce firm compliance with the optimal policy.

Suggested Citation

  • Athanasios Kampas & Katerina Melfou & Ashar Aftab, 2012. "Designing Regulatory Policies for Complex Externalities: The Case of Agricultural Pollution," Working Papers 2012-6, Agricultural University of Athens, Department Of Agricultural Economics.
    • Handle: RePEc:aua:wpaper:2012-6
    as

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    References listed on IDEAS

    as
    1. Lars Hansen, 1998. "A Damage Based Tax Mechanism for Regulation of Non-Point Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 12(1), pages 99-112, July.
    2. Segerson, Kathleen & Wu, JunJie, 2006. "Nonpoint pollution control: Inducing first-best outcomes through the use of threats," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 165-184, March.
    3. Russell, Clifford S., 2001. "Applying Economics to the Environment," OUP Catalogue, Oxford University Press, number 9780195126846.
    4. Horan, Richard D. & Shortle, James S. & Abler, David G., 1998. "Ambient Taxes When Polluters Have Multiple Choices," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 186-199, September.
    5. Tietenberg, T. H., 1974. "Derived decision rules for pollution control in a general equilibrium space economy," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 3-16, May.
    6. Quirino Paris & Keith Knapp, 1989. "Estimation of von Liebig Response Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(1), pages 178-186.
    7. Grimm, Sadi S. & Paris, Quirino & Williams, William A., 1987. "A Von Liebig Model For Water And Nitrogen Crop Response," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 12(2), pages 1-11, December.
    8. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, December.
    9. Peter Berck & Gloria Helfand, 1990. "Reconciling the von Liebig and Differentiable Crop Production Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(4), pages 985-996.
    10. Madhu Khanna, 2001. "Non‐Mandatory Approaches to Environmental Protection," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 291-324, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    complex externalities; state dependent linear ambient tax; voluntary schemes; moral hazard; incentive compatibility; spatial externalities;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q19 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Other
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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