Pesticides, preference heterogeneity and environmental taxes

Chalak, A., Balcombe, K., Bailey, A. and Fraser, I. (2008) Pesticides, preference heterogeneity and environmental taxes. Journal of Agricultural Economics, 59 (3). pp. 537-554. ISSN 0021-857X doi: 10.1111/j.1477-9552.2008.00163.x

Abstract/Summary

In this paper we present results from two choice experiments (CE), designed to take account of the different negative externalities associated with pesticide use in agricultural production. For cereal production, the most probable impact of pesticide use is a reduction in environmental quality. For fruit and vegetable production, the negative externality is on consumer health. Using latent class models we find evidence of the presence of preference heterogeneity in addition to reasonably high willingness to pay (WTP) estimates for a reduction in the use of pesticides for both environmental quality and consumer health. To place our WTP estimates in a policy context we convert them into an equivalent pesticide tax by type of externality. Our tax estimates suggest that pesticide taxes based on the primary externality resulting from a particular mode of agricultural production are a credible policy option that warrants further consideration.