609 research outputs found
THE SUBSIDY FOR ADOPTING CONSERVATION TILLAGE: ESTIMATION FROM OBSERVED BEHAVIOR
Due to payoff uncertainties combined with risk aversion and/or real options, farmers may demand a premium in order to adopt conservation tillage practices, over and above the compensation for the expected profit losses (if any). We propose a method of directly estimating the financial incentives for adopting conservation tillage and distinguishing between the expected payoff and the premium of adoption based on observed behavior. We find that the premium may play a significant role in farmers' adoption decisions. Even for non-adopters, conservation tillage provides a higher payoff than does conventional tillage on average, as agronomists have argued. However, non-adopters do not use conservation tillage because the expected profit gain alone does not fully compensate them for the uncertainties. To induce additional adoption, subsidies could be used. We find that in Iowa on average, the mean subsidy needed is 3.50 per acre per year for soybeans.Land Economics/Use,
Institutions and the Value of Nonpoint Source Measurement Technology: Carbon Sequestration in Agricultural Soils
The development of technologies for accurate field-scale carbon assessment allows the implementation of more efficient policies than can be implemented in their absence. We estimate the value of accurate measurement technology by estimating the gains from implementing a more efficient policy, one that targets carbon reductions at the field scale but requires accurate field-scale measurement technology, relative to a practice-based policy that can be implemented in the absence of such technology. We find large cost savings due to improved targeting of conservation tillage subsidies for the state of Iowa. The cost savings depend significantly on the choice of baseline carbon, while the ability of the government to cost discriminate has little impact on the value of accurate measurement technology.carbon sequestration, green payment policy, value of measurement technology.
Multiple Benefits of Carbon-Friendly Agricultural Practices: Empirical Assessment of Conservation Tillage in Iowa
In this study, we estimate empirically the multiple benefits of a subsidy policy that would offer payments to farmers in return for the adoption of conservation tillage and compare the outcomes of alternative targeting designs for such a policy. Using data for roughly 12,000 National Resource Inventory (NRI) points, we simulate for the state of Iowa the least-cost policy schemes for offering payment incentives. We use an economic model of conservation tillage adoption to evaluate the costs of adoption, and we use a model that simulates physical processes (Environmental Policy Integrated Climate, or EPIC) to estimate the environmental benefits of adoption at each of the NRI points. We assess the costs and environmental consequences of two targeting options. The first is a practice-based policy instrument that maximizes the acres of land in conservation tillage, regardless of the level of environmental benefits achieved. The second is a performance-based instrument that yields the highest amount of environmental benefits per dollar spent. We consider four performance-based benefits: carbon sequestration in agricultural soils, reduction in nitrogen runoff, reduction of erosion of soil by wind, and reduction of erosion of soil by water. We find that the practice-based instrument provides high proportions of the four benefits relative to the performance-based instrument, especially at higher budget levels. Similarly, we estimate that targeting one of the four benefits provides high percentages of the other benefits compared to the amounts obtainable if they were targeted directly.conservation tillage, multiple benefits, subsidy policy, targeting.
Dynamic Willingness to Pay: An Empirical Specification and Test
In a static setting, willingness to pay for an environmental improvement is equal to compensating variation. However, in a dynamic setting characterized by uncertainty, irreversibility, and the potential for learning, willingness to pay may also contain an option value. In this paper, we incorporate the dynamic nature of the value formulation process into a study using a contingent valuation method, designed to measure the value local residents assign to a north-central Iowa lake. Our results show that willingness to pay is highly sensitive to the potential for future learning. Respondents offered the opportunity to delay their purchasing decisions until more information became available were willing to pay significantly less for improved water quality than those who faced a now-or-never decision. The results suggest that welfare analysts should take care to accurately represent the potential for future learning.Clear Lake, contingent valuation, water quality, willingness to pay.
Policy Persistence in Environmental Regulation
This paper is a study of the optimal emission standards under uncertain pollution damages and transaction costs associated with policy changes. The authors show that, in many situations, either policy changes should be avoided or they should be reduced in scale due to the presence of future transaction costs. Under this constraint, policy persistence can be viewed as the rational response of forward-looking policy makers to future transaction costs, and not just the passive outcome of the current political process
A new explanation for the WTP/WTA disparity
We propose a new explanation for the WTP/WTA disparity in experiments and surveys. Uncertainty, irreversibility and limited learning opportunities can generate commitment costs, driving a wedge between WTP and WTA. We present experimental evidence that supports our hypothesis
Environmental Valuation under Dynamic Consumer Behavior
The paper presents two simple models of dynamic consumer behavior, both taking into consideration the implications for welfare measurement when agents can delay transactions while obtaining additional information. One model studies the effect when a purchased good is non-perishable and can be consumed in the future, while the other model introduces a perishable good, implying that the quantity of consumption can vary in each period. Even in the case of the perishable item, the availability of information at the time of the consumption decision has important implications for welfare measurement. Agents who must make a decision at the present but know that additional information will be available later may change their income allocation to take advantage of the future information. When this leads to the capture of different information sets at these different times, welfare assessment may be (but is not necessarily) inconsistent with the empirical evidence and may be inappropriate for use in policy valuation
Willingness-to-Pay, Compensating Variation, and the Cost of Commitment
We present a dynamic model of an agent\u27s decision to purchase or sell a good under conditions of uncertainty, irreversibility, and learning over time. Her WTP contains both the intrinsic value of the good and a commitment cost associated with delaying the decision until more information is available. Consequently, the standard Hicksian equivalence between WTP/WTA and compensating and equivalent variation no longer holds. This finding has important practical implications as it implies that observed WTP values are not always appropriate for welfare analysis
Environmental Valuation Under Dynamic Consumer Behavior
The paper presents two simple models of dynamic consumer behavior, both taking into consideration the implications for welfare measurement when agents can delay transactions while obtaining additional information. One model studies the effect when a purchased good is non-perishable and can be consumed in the future, while the other model introduces a perishable good, implying that the quantity of consumption can vary in each period. Even in the case of the perishable item, the availability of information at the time of the consumption decision has important implications for welfare measurement. Agents who must make a decision at the present but know that additional information will be available later may change their income allocation to take advantage of the future information. When this leads to the capture of different information sets at these different times, welfare assessment may be (but is not necessarily) inconsistent with the empirical evidence and may be inappropriate for use in policy valuation.
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