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Prevention and Compensation of Muddy Flows: Some Economic Insights

  • Sandrine Spaeter
  • François Cochard
  • Anne Rozan

Recent surveys report the increasing number of muddy flows in many areas, and point out the fact that agricultural practices (among others) influence significantly the risk and severity of muddy flows. In this paper, we investigate the economic incentives that can be given to the farmer to adopt different practices. We propose an original economic instrument that entails an `ambient tax', voluntary revelations and a compensation fund. Because of the authorities' difficulties to be informed of each farmer's individual efforts, the tax cannot depend on the individual but on the collective level of efforts. However, each agent may lower his tax payment by revealing his individual efforts to the regulator so that high efforts may be rewarded compared to low ones. The tax revenue is used to supply a fund that is dedicated to the compensation of victims if a muddy flow occurs. hence it is possible to simultaneously increase the incentives for farmers to adopt more environmentally friendly practices and to improve the compensation of victims without mitigating their incentives to protect themselves against the risk of muddy flow.

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Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2006-29.

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Date of creation: 2006
Date of revision:
Handle: RePEc:ulp:sbbeta:2006-29
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  7. Camacho Cuena, Eva & Requate, Till, 2004. "Collective and Random Fining versus Tax/Subsidy - Schemes to Regulate Non-Point Pollution : An Experimental Study," Economics Working Papers 2004,10, Christian-Albrechts-University of Kiel, Department of Economics.
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  13. Happe, Kathrin & Damgaard, Martin & Osuch, Amanda & Sattler, Claudia & Zander, Peter & Uthes, Sandra & Schuler, Johannes & Piorr, Annette, 2006. "CAP-reform and the provision of non-commodity outputs in Brandenburg," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 55(5/6).
  14. Ribaudo, Marc & Horan, Richard D. & Smith, Mark E., 1999. "Economics of Water Quality Protection from Nonpoint Sources: Theory and Practice," Agricultural Economics Reports 33913, United States Department of Agriculture, Economic Research Service.
  15. Christian A. Vossler & Gregory L. Poe & William D. Schulze & Kathleen Segerson, 2006. "Communication and Incentive Mechanisms Based on Group Performance: An Experimental Study of Nonpoint Pollution Control," Economic Inquiry, Western Economic Association International, vol. 44(4), pages 599-613, October.
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