Agricultural & Resource Economics
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Item The Role of Information in Policy Implementation(2020) Andarge, Tihitina Tesfaye; Lichtenberg, Erik; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Firms will comply with a regulation when the expected costs of noncompliance exceed the expected benefits. If the regulator has incomplete enforcement information and firms are aware of this, it will enter into their calculation of expected benefits and costs. The literature on regulatory enforcement typically assumes that the regulator is able to identify the universe of regulated firms. In my dissertation, I relax this assumption by allowing for the existence of regulatory information gaps and examine the implications for compliance and ambient environmental quality. The first chapter reviews the literature on the enforcement of environmental regulations. The second chapter examines the effect of regulatory information gaps on a firm’s compliance strategy. The theoretical results indicate that a firm with a sufficiently low probability of being subject to enforcement action will delay compliance. This prediction is tested empirically in the context of nutrient management regulations in Maryland. The econometric results indicate that the probability of being included in the MDA farm registry is associated with a statistically significant increase in the probability of being in compliance with nutrient management regulations. If information gaps have an effect on a firm’s compliance decision, then they may potentially have consequent effects on ambient environmental quality. In the third chapter, I develop a theoretical model of the firm’s optimal level of emissions under information gaps. The theoretical results indicate that the optimal level of emissions is decreasing in the likelihood of being known to the regulator. If decreases in a firm’s emissions result in decreases in ambient pollution levels, then ambient pollution levels are also decreasing in the probability of being known. I test this prediction empirically within the context of Clean Water Act (CWA) permit regulations. The empirical results indicate that a one percentage point increase in the share of firms known to the regulator results in a 0.43% - 0.49% percent decrease in ambient pollutant concentration for three out of the four pollutants. Increasing the share of known firms by 5 percentage points could lead to benefits, in terms of improved water quality, of $165.9 million per year.Item Agriculture, Environmental Incentive Payments, and Water Quality in the Chesapeake Bay(2016) Fleming, Patrick; Lichtenberg, Erik; Newburn, David; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Nonpoint sources (NPS) pollution from agriculture is the leading source of water quality impairment in U.S. rivers and streams, and a major contributor to lakes, wetlands, estuaries and coastal waters (U.S. EPA 2016). Using data from a survey of farmers in Maryland, this dissertation examines the effects of a cost sharing policy designed to encourage adoption of conservation practices that reduce NPS pollution in the Chesapeake Bay watershed. This watershed is the site of the largest Total Maximum Daily Load (TMDL) implemented to date, making it an important setting in the U.S. for water quality policy. I study two main questions related to the reduction of NPS pollution from agriculture. First, I examine the issue of additionality of cost sharing payments by estimating the direct effect of cover crop cost sharing on the acres of cover crops, and the indirect effect of cover crop cost sharing on the acres of two other practices: conservation tillage and contour/strip cropping. A two-stage simultaneous equation approach is used to correct for voluntary self-selection into cost sharing programs and account for substitution effects among conservation practices. Quasi-random Halton sequences are employed to solve the system of equations for conservation practice acreage and to minimize the computational burden involved. By considering patterns of agronomic complementarity or substitution among conservation practices (Blum et al., 1997; USDA SARE, 2012), this analysis estimates water quality impacts of the crowding-in or crowding-out of private investment in conservation due to public incentive payments. Second, I connect the econometric behavioral results with model parameters from the EPA’s Chesapeake Bay Program to conduct a policy simulation on water quality effects. I expand the econometric model to also consider the potential loss of vegetative cover due to cropland incentive payments, or slippage (Lichtenberg and Smith-Ramirez, 2011). Econometric results are linked with the Chesapeake Bay Program watershed model to estimate the change in abatement levels and costs for nitrogen, phosphorus and sediment under various behavioral scenarios. Finally, I use inverse sampling weights to derive statewide abatement quantities and costs for each of these pollutants, comparing these with TMDL targets for agriculture in Maryland.Item Water Quality Credit Trading(CANRP, 2011-12-16) Parker, DougCan aggressive pollution reduction in one sector compensate for continued pollution in another? Pollution credit markets are designed to make this trade-off work. But is the time ripe for water quality credit trading systems to serve as an effective means of reducing pollution from farmland? Dr. Doug Parker of the University of Maryland is skeptical.Item From Ohio to Chesapeake(CANRP, 2012-08-31) Newburn, David A.What can be learned from one of the most successful water quality trading program to date? Do auctions result in cost effective changes? How do the institutional arrangements affect farmer participation and program results? Dr. David Newburn at the University of Maryland takes a look at Ohio’s Great Miami Trading Program to get answers and draw implications for the Chesapeake Bay Watershed.