Predicted economic effects of environmental quality control policies on linear firm models and an application to an irrigated farm model Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/cc08hh73f

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  • Linear economic models were utilized to predict effects of various environmental control policies on individual firms. Four different linear models were specified and in some instances relatively minor changes in specification were made which resulted in additional sub-models. Models varied as to numbers and types of fixed factors, variable cost relationships, market products, and fixed factor requirements. Once each model or sub-model was described five or six policies were theoretically applied to that model. Policies used were: taxing market products, taxing variable factors, taxing a non-market externality (external diseconomy), a standard on the quality of the externality, subsidizing variable factors and subsidizing fixed factors. It was assumed that the non-market externality would be produced in a fixed ratio with market products. Furthermore, the assumption was made that alternative production techniques were available to the firm. The important aspect of the various techniques was that the proportion of the externality generated by a market product varied by production method. Consequently, strong emphasis in the analysis was placed on determining whether or not a given policy could induce the firm to switch to a lower externality generating production method. In addition to the strictly theoretical analysis a linear irrigated farm model was described. The farm model produced irrigation return flows which were considered to be creating stream pollution. From the theoretical analysis likely policies for controlling return flows were ascertained. Some of these policies were then applied to the farm model. Specifically, a water tax (variable factor tax) and a constraint on delivered water were administered to the farm model. Based on the theoretical analysis taxing market products did not appear to be a particularly desirable policy. For some models, the market product tax actually increased externality production. A tax on externality production (effluent tax) seemed to give the most consistent effects of all policies across all models. The externality tax either reduced or had no effect on externality production. The biggest shortcoming of the externality tax appeared to be administrative. Before the tax can be used the externality must be identifiable as to source. Consequently, a search was made for policies which generated results similar to the externality tax yet were not subject to the same administrative problem. It appeared that under specific conditions a variable factor tax, a tax on specialized fixed factors or a combination of a tax-subsidy scheme could be effective alternative policies. However, these latter policies, if improperly applied could result in increased externality production. Taxes as high as 65 cents per acre inch of water were applied to the farm model. Depending on assumed conditions the water tax resulted in reduced irrigation return flows. When labor was constrained tax levels needed to be higher to reduce return flows compared to the case where labor was not constrained. Placing a restraint on delivered water also reduced return flows. Again, when labor was constrained this policy was not as effective as when labor was unconstrained. The water tax policy reduced net returns to the farm model considerably more than the constraint on delivered water. The main difference in net revenues was attributable to the total water tax bill rather than reductions from other added costs and/or enterprise changes.
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  • description.provenance : Approved for entry into archive by Patricia Black(patricia.black@oregonstate.edu) on 2011-12-09T18:44:34Z (GMT) No. of bitstreams: 1 CLARKRICHARD1972.pdf: 3970154 bytes, checksum: 37a9fe6dfdf3c54bf7d4dd364ddd9ef8 (MD5)
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  • description.provenance : Submitted by Erin Clark (ecscannerosu@gmail.com) on 2011-11-29T15:57:46Z No. of bitstreams: 1 CLARKRICHARD1972.pdf: 3970154 bytes, checksum: 37a9fe6dfdf3c54bf7d4dd364ddd9ef8 (MD5)
  • description.provenance : Made available in DSpace on 2011-12-09T18:44:34Z (GMT). No. of bitstreams: 1 CLARKRICHARD1972.pdf: 3970154 bytes, checksum: 37a9fe6dfdf3c54bf7d4dd364ddd9ef8 (MD5) Previous issue date: 1972-05-02

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