Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution
Journal or Book Title
Environmental and Resource Economics
First Page or Article ID Number
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.
Wu, JunJie and Babcock, Bruce A., "Spatial Heterogeneity and the Choice of Instruments to Control Nonpoint Pollution" (2001). Economics Publications. 533.