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Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution

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  • Wu, JunJie
  • Babcock, Bruce A.

Abstract

Because it is difficult to monitor emissions and to implement differentialtaxes and standards, uniform taxes and standards on agricultural chemicaluse are often proposed and used to control nonpoint-source pollution. Thisarticle analyzes the relative efficiency of these uniform instruments in thepresence of spatial heterogeneity. We show that the relative slopes of themarginal pollution cost and marginal profit of chemical use are only one ofthe factors that affect the relative efficiency. Other factors includecorrelation between marginal pollution costs and marginal profits and theslope and variability of marginal profits. In addition, a uniform tax mayresult in some farmers not using the chemical, and a uniform standard mayhave no effect on low-input land. We show empirically that the presence ofcorner solutions can reverse a conventional finding of tax or standardsuperiority based on the relative-slop rule.

Suggested Citation

  • Wu, JunJie & Babcock, Bruce A., 2001. "Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution," ISU General Staff Papers 200101010800001192, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genstf:200101010800001192
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    Cited by:

    1. Encarna Esteban & José Albiac, 2016. "Salinity Pollution Control in the Presence of Farm Heterogeneity — An Empirical Analysis," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 1-20, June.
    2. Constadina Passa & Anastasios Xepapadeas, 2008. "Modelling of Agricultural Behavior under the CAP Regime: Policy Effectiveness and Design," Working Papers 0819, University of Crete, Department of Economics.
    3. Philippe Bontems & Gilles Rotillon & Nadine Turpin, 2004. "Improvement of water quality as a joint production of milk when dairy farms are heterogeneous [Incitation à la production jointe d'eau de qualité et de lait lorsque les exploitations laitières sont," Post-Print hal-01606126, HAL.
    4. Rohling, Moritz & Ohndorf, Markus, 2012. "Prices vs. Quantities with fiscal cushioning," Resource and Energy Economics, Elsevier, vol. 34(2), pages 169-187.
    5. Lally, Breda & van Rensburg, Tom M., 2014. "Reducing nitrogen applications on Irish dairy farms: effectiveness and efficiency of different strategies," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 4(1), October.
    6. Canton, Joan & De Cara, Stéphane & Jayet, Pierre-Alain, 2009. "Agri-environmental schemes: Adverse selection, information structure and delegation," Ecological Economics, Elsevier, vol. 68(7), pages 2114-2121, May.
    7. Boyd, James, 2003. "Water Pollution Taxes: A Good Idea Doomed to Failure?," Discussion Papers dp-03-20, Resources For the Future.
    8. Boyd, James, 2003. "Water Pollution Taxes: A Good Idea Doomed to Failure?," Discussion Papers 10611, Resources for the Future.
    9. Constadina Passa & Anastasios Xepapadeas, 2008. "Modelling of Agricultural Behavior under the CAP Regime: Assessment of Environmental Impacts and Policy Effectiveness," Working Papers 0818, University of Crete, Department of Economics.
    10. Aftab, Ashar & Hanley, Nick & Baiocchi, Giovanni, 2010. "Integrated regulation of nonpoint pollution: Combining managerial controls and economic instruments under multiple environmental targets," Ecological Economics, Elsevier, vol. 70(1), pages 24-33, November.
    11. Helin, Janne, 2009. "Does geography matter in nutrient abatement? Bioeconomic model of heteregoneus farm nutrient loads," 2009 Conference, August 16-22, 2009, Beijing, China 51693, International Association of Agricultural Economists.
    12. Brock, William & Xepapadeas, Anastasios, 2010. "Pattern formation, spatial externalities and regulation in coupled economic-ecological systems," Journal of Environmental Economics and Management, Elsevier, vol. 59(2), pages 149-164, March.
    13. Athanasios Kampas & Ben White, 2004. "Administrative Costs and Instrument Choice for Stochastic Non-point Source Pollutants," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(2), pages 109-133, February.
    14. Petsakos, Athanasios & Jayet, Pierre-Alain, 2010. "Evaluating the efficiency of a N-input tax under different policy scenarios at different scales," 120th Seminar, September 2-4, 2010, Chania, Crete 109397, European Association of Agricultural Economists.
    15. Picazo-Tadeo, Andres J. & Reig-Martinez, Ernest, 2007. "Farmers' costs of environmental regulation: Reducing the consumption of nitrogen in citrus farming," Economic Modelling, Elsevier, vol. 24(2), pages 312-328, March.
    16. James Shortle & Richard D. Horan, 2017. "Nutrient Pollution: A Wicked Challenge for Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 1-39, April.

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