SEB - ecn371 - Environmental economics

Public goods in agriculture

1. Romstad (2006) shows that in a multi-product production framework and where the only rational allocation is where there is a negative tradeoff between the market commodity and public good, price supports produce larger distortions than direct payments for the public good. In settings where transaction costs for direct payments are high, the paper shows why acreage payments are better than price supports in the sense that distortions on commodity markets are less.

2. Vatn (2002) argues that under positive jointness and positive transaction costs, one can achieve the same level of public goods provided at lower costs than using direct payments for the public good.

Romstad, E. (2007): Distortive effects from agri-environmental policies, Unpublished memo, Department of Economics & Resource Management, Norwegian University of Life Sciences, Ås, Norway [http://athene.umb.no/emner/pub/ECN371/notes/romstad-direct.pdf as of March 6, 2007].

Vatn, A. (2002): "Multifunctional agriculture: some consequences for international trade regimes", European Review of Agricultural Economics, 29:309-327. [http://erae.oxfordjournals.org/cgi/reprint/29/3/309?maxtoshow=&HITS=10&hits=10&RESULTFORMAT=&fulltext=vatn&searchid=1&FIRSTINDEX=0&resourcetype=HWCIT as of March 6, 2007].

Last updated: 06.03.2007   Copyright © Eirik Romstad