Agri-Environmental Program Compliance in a Heterogeneous Landscape

Jussi Lankoski, Erik Lichtenberg and Markku Ollikainen

No 37797, Working Papers from University of Maryland, Department of Agricultural and Resource Economics

Abstract: Heterogeneity of agricultural landscapes may necessitate the use of spatially targeted instrument combinations to implement the social optimum. But compliance with these policies may require costly enforcement. This paper examines the design of agri-environmental policies featuring two of the most commonly used instruments, reductions in fertilizer application rates and installation of riparian buffers. While compliance with buffer strip requirements is verifiable at negligible cost, fertilizer application is only verifiable through costly monitoring. We derive optimal subsidies for fertilizer reduction and buffer strip set-asides and enforcement strategies for the cases of low and excessive monitoring costs. An empirical simulation model suggests that enforceable policies can come close to replicating socially optimal crop production, nitrogen runoff, and overall welfare without requiring increases in overall subsidy expenditures, at least under conditions characteristic of Scandinavia. Sensitivity analysis suggests that these conclusions may carry over to areas with higher overall land quality as well.

Keywords: Agricultural and Food Policy; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 27
Date: 2008
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Citations: View citations in EconPapers (2)

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Journal Article: Agri-Environmental Program Compliance in a Heterogeneous Landscape (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umdrwp:37797

DOI: 10.22004/ag.econ.37797

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