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Marginal Analysis of Welfare Costs of Environmental Policies: The Case of Pesticide Regulation
Author(s) -
Lichtenberg Erik,
Parker Douglas D.,
Zilberman David
Publication year - 1988
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1241928
Subject(s) - economics , welfare , equity (law) , price elasticity of demand , price elasticity of supply , agricultural economics , redistribution (election) , natural resource economics , elasticity (physics) , microeconomics , marginal cost , public economics , econometrics , market economy , materials science , politics , political science , law , composite material
We present a methodology for estimating net social welfare costs and their distribution using only information on price, quantities, elasticities of supply and demand, and estimates of cost and/or yield effects of policies provided by natural scientists. An application to a case of pesticide regulation demonstrates the importance of equity effects. Simulations show that redistribution of income among producers becomes the dominant effect of pesticide policies when supply elasticities are higher and demand elasticities are lower, with changes in supply elasticity having a greater impact than changes in demand elasticity. For crops with significant export markets, foreign consumers are shown to bear much of the short‐run cost.