Shadow prices and pollution costs in U.S. agriculture |
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| Institution: | 1. Department of Economics, Lewis & Clark College, 0615 SW Palatine Hill Rd., Portland, OR, USA;2. Department of Fisheries and Wildlife, Oregon State University, Corvallis, OR, USA;1. Departamento de Ingeniería Hidráulica y Ambiental, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago, Chile;2. Escuela de Arquitectura e Instituto de Estudios Urbanos, Pontificia Universidad Católica de Chile, El Comendador 1916, Santiago, Chile;3. Centro de Desarrollo Urbano Sustentable CONICYT/FONDAP/15110020, Av. Vicuña Mackenna 4860, Santiago, Chile;4. Department of Mathematics for Economics, University of Valencia, Avd. Tarongers S/N, Valencia, Spain;1. Department of Industrial and Systems Engineering, Texas A&M University, College Station, TX, USA;2. School of Information Science and Technology, Osaka University, Suita, Japan;3. Department of Economics, Rice University, Houston, TX, USA;4. Department of Economics, University of Arkansas, Fayetteville, AR, USA |
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| Abstract: | We use the directional output distance function to derive estimates of production inefficiency, shadow prices for polluting outputs, and the associated pollution costs. Using a quadratic functional form for the directional output distance function and data for the U.S. agricultural sector during 1960–1996, we find that the pollution costs (the shadow values) from the runoff and leaching of pesticides are 6% of crop and animal revenues and are highest in the Midwest and lowest in the Western states. If states were to reduce technical inefficiency and operate on the production frontier, pollution costs could be reduced by 7%. |
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