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AUTHORS:
Gwendolyn A Aldrich, University of New Mexico;
Janie Chermak, University of New Mexico;
Jennifer A Thacher, University of New Mexico
December 2008
ABSTRACT
Agricultural nonpoint pollution is diffcult to regulate for numerous reasons, including uncertainty regarding the relationship between farm practices and pollutant levels, stochastic weather patterns that affect pollution levels and yields, and inability to monitor the flow of pollutants from individual farms. Two commonly proposed regulatory mechanisms are uniform taxes and standards. Prior research in this literature assumes producers are risk neutral. However, empirical evidence suggests farmers are risk averse. To increase the model’s applicability to agricultural nonpoint pollution regulation we incorporate risk aversion into the model. An empirical application is used to illustrate how risk preferences might affect the regulatory mechanism choice.
Because many of the urban sprawl externalities are nonpoint in nature, regulatory challenges are similar to those posed by agricultural nonpoint pollution. This suggests that regulations aimed at reducing sprawl may be an indirect means of mitigating the environmental impacts of urban sprawl. An econometric model is used to analyze and predict residential land use change patterns in Albuquerque, New Mexico and surrounding areas. Results are used to assess the effectiveness of zoning restrictions in controling sprawl, and to test whether there are signifcant differences in the parameter estimates for urban and sprawl residential development patterns.
Keywords: water quality, nonpoint pollution, risk aversion, agriculture, regulation, tax, standard, land use change, sprawl
Account Number 109469D
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Hardcopy of report available from: New Mexico Water Resources Research Institute, NMSU, Box 30001, MSC 3167, Las Cruces, NM 88003 http://wrri.nmsu.edu/publish/order.html