Food
Environment
Trade
Risk
BiorenewablesParadox for Agro-Environmental Land Policy, A
David A. Hennessy, Hongli Feng
October 2009 [09-WP 499]
A regulator with a fixed budget to spend on securing environmental benefits from farmed land has to choose between how many acres to enroll and the extent of benefits to require of each enrolled acre. Here we consider, given heterogeneous land, what properties of the environmental benefit-to-cost ratio imply for the choice of optimal program as the available budget varies. Conditions are found such that a program of high benefits on few acres is preferred for any budget level. It is also possible that a program delivering low benefits per acre at low cost is preferred on each land type, and yet a high benefit program is optimal policy, a variant of Simpson's paradox.
Keywords: benefit-to-cost ratio, environmental policy, land heterogeneity, Simpson's paradox. JEL classification: D6; Q2
Full Text 135 KB