Water Quality And Land Use: Implications For Regulation And Urban Planning
Type: Technical Report
Date Published: December 2008
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.
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Keywords: water quality, nonpoint pollution, risk aversion, agriculture, regulation, tax, standard, land use change, sprawl