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Contract Design for the Purchase of Environmental Goods from Agriculture

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  • Wu, JunJie
  • Babcock, Bruce A.

Abstract

An environmental stewardship program, whereby farmers are paid directly for the environmental goods they provide, is developed by combining the microparameter distribution model with mechanism design principles. The program overcomes the information asymmetry between farmers and governments and accounts for the deadweight losses from distortionary taxes. The characteristics of optimal input and payment schedules of the program are derived. These optimal schedules are determined by the tradeoffs between farming profits, environmental benefits, and deadweight losses from taxes, and are second-best except under restrictive conditions on deadweight losses from taxes and on the marginal product of inputs and marginal pollution costs. Copyright 1996, Oxford University Press.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Wu, JunJie & Babcock, Bruce A., 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," Staff General Research Papers Archive 1050, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:1050
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    References listed on IDEAS

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    1. Mattila, J. Peter & Orazem, Peter, 1990. "The Implementation Process of Comparable Worth: Winners and Losers," Staff General Research Papers Archive 10842, Iowa State University, Department of Economics.
    2. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
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    5. Steven H. Sandell & David Shapiro, 1980. "Work Expectations, Human Capital Accumulation, and the Wages of Young Women," Journal of Human Resources, University of Wisconsin Press, pages 335-353.
    6. Randall K. Filer, 1983. "Sexual Differences in Earnings: The Role of Individual Personalities and Tastes," Journal of Human Resources, University of Wisconsin Press, pages 82-99.
    7. Quinn, Joseph F, 1982. "Pension Wealth of Government and Private Sector Workers," American Economic Review, American Economic Association, pages 283-287.
    8. McDowell, John M, 1982. "Obsolescence of Knowledge and Career Publication Profiles: Some Evidence of Differences among Fields in Costs of Interrupted Careers," American Economic Review, American Economic Association, pages 752-768.
    9. Orazem, Peter F & Mattila, J Peter, 1990. "The Implementation Process of Comparable Worth: Winners and Losers," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 134-152, February.
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