Welfare impacts of alternative public policies for environmental protection in agriculture in an open economy: A general equilibrium framework

This research develops analytical and numerical general equilibrium models to evaluate and examine economic consequences of a wide range of policies, including market based tax and subsidy policies and land retirement, for reducing pollution from crop production for the whole U.S. economy at a macro level while recognizing the presence of distortionary agricultural support subsidies, factor income taxes, and exports of crop products.;In contrast to previous studies in the field of environmental regulation in the presence of distortionary income taxes, this dissertation shows that examined policies, except for land retirement, may generate a double-dividend (an economic gain over and above the environmental gains) for two main reasons: pre-existing agricultural support subsidies and exports of agricultural products. The extent of the welfare gains differ across policies and with the nitrogen reduction target. In addition, this dissertation shows that a two-part instrument (a combination of implementable market based policies which restrict crop production and encourage farmers to reduce applied nitrogen) can be used to reduce agricultural pollution. The two-part instruments can be defined in terms of a budget reform in agricultural subsidies. Furthermore, this dissertation illustrates that when land and nitrogen fertilizer are substitutable, retiring croplands may raise the demand for nitrogen and cause more nitrogen pollution. It also shows that taxing applied nitrogen may perform better than taxing nitrogen pollution in the presence of agricultural subsidies in an open economy.