Title

Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution

Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

2001

Journal or Book Title

Environmental and Resource Economics

Volume

18

First Page or Article ID Number

173

Last Page

192

DOI

10.1023/A:1011164102052

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.

Comments

This working paper was published as Wu, JunJie and Bruce A. Babcock, "Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution," Environmental and Resource Economics (2001): 173–192, doi:10.1023/A:1011164102052.