INDUSTRY LOCATION MODELING: EXTENSIONS OF THE PLAINS ECONOMIC TARGETING SYSTEM

Community/Rural/Urban Development, Industrial Organization,

Simulation of factors impeding water quality trading market performance

Over the past several decades, market-based approaches to natural resource management have received increased attention as a means to cost-effectively achieve environmental quality goals. Following on what has been hailed a success for reducing air pollution, water quality trading (WQT) has more recently been seen as the next great opportunity for reducing water pollution, especially for nutrient loading. Numerous trading programs have been pilot tested and/or adopted in states throughout the nation, with more than 70 programs now in operation (Breetz et al., 2004). WQT would allow multiple contributors to surface water degradation to determine how best to meet an overarching collective goal related to pollution reduction. WQT takes advantage of differences in pollution abatement costs. In the case of point/nonpoint source trading, such as between wastewater treatment plants (WWTPs) and agricultural producers, it is often the agricultural producers who can achieve a given level of nutrient reduction at less cost through their adoption of various best management practices that reduce sedimentation and nutrient loading to surface waters. Trading would allow WWTPs to purchase “credits” generated by producers who reduced their pollution loading to achieve an equivalent level of reduction as might be required by a regulatory discharge permit at a lower overall cost. While there is substantial evidence that nonpoint sources have lower nutrient reduction costs than point sources, experience with WQT reveals a common theme: little or no trading activity. The success of WQT seems, in part, to depend on the structure of the market created to bring buyers and sellers together to transact exchanges. These outcomes suggest the presence of obstacles to trading that were not recognized in the design of existing programs. To examine the ways that various market imperfections may impact the performance of a WQT market, an agent-based model was constructed which simulated a hypothetical point-nonpoint market. In particular, the market was modeled using a variant of the sequential, bilateral trading algorithm proposed by Atkinson and Tietenberg (1991). Our proposed paper first presents an overview of the simulation modeling technique and then analyzes the effects of two prominent market impediments identified in the WQT literature: information levels and trading ratios. Information levels refer to buyers’ and sellers’ knowledge of each others’ bid prices. A frictionless WQT market would be one where all of the potential buyers (i.e., point sources) would know all of the sellers’ (i.e., nonpoint sources) offer prices and vice versa. In this full information environment, we can expect that trades would be consummated in the order of their gains. That is, first buyers and sellers to be paired together for trading would be the buyers with the highest offer prices and the sellers with the lowest bid prices. Successive trades will have successively smaller gains until the gap between bid and offer prices reaches zero. This is the textbook Walrasian market and would closely approximate a double auction institution, where all buyers and sellers submit their offers and bids, which are then sorted and matched by a centralized market manager. While the full information scenario serves as a useful benchmark, most existing WQT markets are decentralized in nature, so that limited information causes traders to be matched in a less efficient sequence. A variety of information levels are possible. One side of the market may have more information than the other (limited information) or neither side having any knowledge of the other side’s bid or offer prices (low information). Each of these scenarios leads to a different sequencing of trades. This paper analyzes the effect of different information levels on market performance. Market performance is measured in terms of cost savings, the number of credits traded, and the average reduction costs under different information scenarios. Trading ratios are a common component of many existing WQT programs. A typical trading ratio of 2:1 requires a nonpoint source to reduce two pounds of expected nutrient loading in order to receive one pound of trading credit. These ratios serve as a “safety factor” and are incorporated to account for the uncertainty in the measurement and monitoring of nonpoint source loading. Because nonpoint traders must reduce loading by 2 pounds for every 1 pound emitted by point source traders, there will be a net reduction of 1 pound of expected loading for each trade. So, while inhibiting some trades from ever occurring, trading ratios also have the potential to improve water quality beyond trading with a 1:1 trading ratio. This paper examines these tradeoffs in terms of effects on market performance and then describes procedures that can be used to characterize an optimal trading ratio if one exists. Because WQT programs, by nature, involve complex interactions between economics and the biophysical world, accurately simulating a real-world WQT market requires at minimum a basic understanding of the types of data that watershed models can provide. This paper concludes by briefly discussing data requirements, points of consideration, and integrative techniques used in the simulation of WQT in real-world watersheds.water quality trading, market based, trading ratio, information levels, point source, nonpoint source, simulation, Environmental Economics and Policy, Resource /Energy Economics and Policy,

Choice Experiments to Assess Farmers' Willingness to Participate in a Water Quality Trading Market

Interest has grown in Water Quality Trading (WQT) as a means to achieve water quality goals, with more than 70 such programs now in operation in the United States. Substantial evidence exists that nonpoint sources can reduce nutrient loading at a much lower cost than point sources, implying the existence of gains from trade. Despite the potential gains, however, the most commonly noted feature of existing WQT markets is low trading volume, with many markets resulting in zero trades. This paper evaluates one explanation for the lack of participation from agricultural nonpoint sources. We test for and quantify the intangible costs that may deter farmers from trading even if the monetary benefits from doing so outweigh the observable out-of-pocket costs. We do so by designing and implementing a series of choice experiments to elicit WQT trading behavior of Great Plains crop producers in different situations. Attributes of the choice experiment included market rules and features (e.g., application time and effort, penalties for violations, means of monitoring compliance) that may affect farmers willingness to trade. The choice experiments were conducted with a total of 135 producers at four locations in the state of Kansas between August 2006 and January 2007. A Random Parameters Logit model is appropriate to analyze the resulting data, revealing diversity in the way that the attributes affect farmers choices.Resource /Energy Economics and Policy,

An Introduction to State and Local Public Finance

Public finance is the field of economics that studies government activities and the various means of financing these activities. In general, public finance deals with any of the three levels of government: federal, state, and local. While the basic theories of public finance apply regardless of the level of government studied, state and local public finance has emerged as an important sub-field of public finance in recent years.https://researchrepository.wvu.edu/rri-web-book/1021/thumbnail.jp

Methodology for Measuring Output, Value Added, and Employment Impacts of State Highway and Bridge Construction Projects

The purpose of this paper is to present a methodology to measure some of the economic impacts of state highway programs. State departments of transportation (DOTs) need such a methodology for a variety of reasons, including long-term highway planning as well as advising state policymakers concerning the economic impacts of highway programs. The specific objectives of this study are: (1) describe a procedure to measure the output, value added, and employment impacts of specific types of highway and bridge improvement, and (2) illustrate an application of the model using data from Kansas. The objectives of the research are accomplished with input-output modeling. An 11-step procedure is described for adjusting the Kansas IMPLAN input-output model so that it is capable of measuring economic impacts for specific types of highway and bridge improvement. The model is illustrated using data from a recently completed study of the Kansas Comprehensive Transportation Program (CTP), which included expenditure of $5.24 billion on state highway system projects. Data from this study are used to demonstrate the calculation of output, value added, and employment impacts for five different highway and bridge improvement categories

THE ECONOMIC IMPACTS OF A FOOT-AND-MOUTH DISEASE OUTBREAK: A REGIONAL ANALYSIS

Contagious animal diseases like foot-and-mouth disease (FMD) are often referred to as economic diseases because of the magnitude of economic harm they can cause to producers and to local communities. This study demonstrates the local economic impact of a hypothetical FMD outbreak in southwest Kansas, an area with high density of cattle feeding. The expected (most probable) economic impact of the disease hinges heavily on where the incidence of the disease occurs. If the disease were to occur in a cow-calf herd in the region economic impact is expected to be relatively small compared to if it were introduced simultaneously in five large feedlots in southwest Kansas. Disease surveillance, management strategies, mitigation investment, and overall diligence clearly need to be much greater in concentrated cattle feeding and processing areas at the large feeding operations in the region.Livestock Production/Industries,

Property Tax Lids and the Effect on Kansas

Cross sectional time series data in a partial adjustment model examine local government behavior under an aggregate property tax levy limit and under Truth in Taxation in Kansas. Results indicate that the aggregate levy limit would have continued to restrict property tax revenue and spending had it not been replaced.Public Economics,

Rural Health Care Information Access and the Use of the Internet: Opportunity for University Extension

The Internet has potential for improving health information delivery and strengthening connections between rural populations and local health service providers. An exploratory case study six rural health care markets in Kansas showed that about 70% of adults use the Internet, with substantial use for accessing health information. While there are statistical differences for general Internet use based on socio-economic characteristics, these digital divides are not so apparent in relation to Internet usage for health-related information. The study opens opportunities for Extension to include Internet usage as an added dimension to programs to aid in community and economic development

Transaction Costs in Payment of Environmental Service Contracts

Citation: Jeffrey M. Peterson, Craig M. Smith, John C. Leatherman, Nathan P. Hendricks, John A. Fox; Transaction Costs in Payment for Environmental Service Contracts, American Journal of Agricultural Economics, Volume 97, Issue 1, 1 January 2015, Pages 219–238, https://doi.org/10.1093/ajae/aau071Payment for environmental service contracts commonly require actions beyond adoption of a practice, such as undergoing specified enrollment procedures, granting consent to being monitored, and paying penalties for violations. These provisions are a bundle of attributes a landholder must accept with contract enrollment, leading to transaction costs in the contracting process. This article develops a principal–agent framework to study the links between these transaction costs and the well-known information asymmetries between the landholders and the government agency offering contracts. Using stated choice data collected from a sample of farmers, we estimate a mixed logit model to quantify the contribution of different contract attributes on contract willingness-to-accept (WTA). More stringent provisions in contracts were found to raise individual WTA by widely differing amounts across farmers, but the average effects imply that overall contract supply is sensitive to stringency. From a series of microsimulations based on the estimated model, we find that transaction costs create a significant drain on the cost-effectiveness of contracting from the agency’s point of view, similar in magnitude to the inefficiency created by hidden information. Although stringent contractual terms raise program expenditures, they may be justified if they raise compliance rates enough to offset the added cost. We also simulate an implicit frontier to trace out the change in compliance needed to justify a given increase in stringency. For environmental benefits in the range of previous estimates, this analysis suggests that stringent terms would need to substantially raise compliance rates to be cost effective

Lower Big Blue watershed assessment: preliminary report

Nejadhashemi, A.P., et. al, Lower Big Blue Watershed Assessment: Preliminary Report, Manhattan, Kansas, Kansas State University, February 2009