Abstracts of Selected Papers

s of Selected Papers Trade Accounts, Environmental Spillovers, and Development (Chair: Linda Lee, Univ. of Connecticut) "Regional Impact of Diary Trade Liberalization on the Northeast U.S. and Central Canada Dairy Sectors," M.A. Doyon, J.E. Pratt, and A.M. Novakovic (Cornell Univ.) Quebec, Ontario, and the Northeast United States are expected to be important players in CanadaU.S. dairy trade. This study explores two dairy trade scenarios between Quebec, Ontario, and the Northeast United States. In simulation I, the United States is allowed to unilaterally export yogurt and frozen desserts to Canada, and simulation II reflects a total free trade environment. Free trade tends to alter somewhat the predominant flow of dairy products from east to west in Canada and west to east in the United States by creating northsouth trade. In both trade simulations, the Canadian farm milk value decreases significantly. "The Economics of Environmental Life Cycle Management and International Trade," J. Beghin and M. Metcalfe (North Carolina State Univ.) With increasing attention being paid to pollution generated during consumption in such environmental policy schemes as Life Cycle Management, this paper incorporates endogenous consumption pollution intensities into a standard dual trade model in order to assess the potential welfare effects of coordinated policy reform. Welfare effects are examined in a small open and distorted economy where pollution is generated during both production and consumption. Producers control the level of pollution induced through consumption of their goods and face incentives to abate this pollution. An additional domestic policy standard must be imposed to obtain welfare-improving conditions through joint trade and environmental policy reform. "Pesticide Use and Environmental Quality: A Global Comparison," A. Erickson (USDA/ERS), D. Gray (Cornell Univ.), and B. KrissotT (USDA/ERS) Few agro-environmental indicators exist for crosscountry comparison purposes. Set in a PressureState-Response framework, this study compares U.S. and other export competitors' pesticide use for five important commodities. Pounds of pesticide active ingredient are adjusted for each chemical's toxicity to long-term human health and persistence in the environment, which is then taken as a proxy for potential environmental degradation. Cross-country comparisons reveal that the United States tends to use the most pounds of active ingredients, but once pesticide use is adjusted for toxicity, persistence, and size of production, at least one other competitor uses more pesticides than does the United States in most cases. "On the Speed of Convergence of Open Economies: An Empirical Analysis," J. Das and D. Abler (Pennsylvania State Univ.) One implication of the neoclassical growth models is that countries grow faster in terms of per capita income if they start farther below their steady-state positions. Thus, countries with lower per capita income may catch up to richer countries in terms of per capita income. Several studies have estimated the speed of convergence using different data sets, but all of them treated the speed of convergence as fixed across the economies. In this paper, we formulate a function for the speed of convergence, which depends on several factors, including the partial output elasticity of capital, the population growth rate, the initial human capital level , and the gap between an economy's per capita income and the mean per capita income for all economies. The results show that differences in physical capital's share, human capital's share, and the level of per capita income across the state economies of India have definite impacts on the speed of convergence. 242 October J996 Agricultural and Resource Economics Review Coastal Watersheds and Groundwater Protection (Chair: Gregory L. Poe, Cornell Univ.) "The Cost Effectiveness of Cooperative Policies in Nonpoint Source Pollution Control," E. Besedin, C. Miller, and J.J. Opaluch (Univ, of Rhode Island) This paper examines the control of coastal pollution from nonpoint sources within the context of a case study in Rhode Island. The paper develops a game theoretic analytical framework for comparing the cost effectiveness of cooperative versus noncooperative programs for mitigating nonpoint source pollution in coastal watersheds. The framework incorporates the stochastic nature of nonpoint source pollution and focuses on the issue of nitrate loadings from septic systems. The framework is applied to the case of nitrate pollution of Greenwich Bay, Rhode Island. Significant potential cost savings are found to result from cooperative programs. "The Economic Impact of Pesticide Use in U.S. Agriculture," J. Fernandez-Cornejo, S. Jans, and M. Smith (USDAIERS) This paper develops the methodology necessary to calculate the impact of Integrated Pest Management (IPM) on pesticide use, yields, and farm profits. This methodology is then applied to the case of IPM adoption among fresh market tomato producers in eight states accounting for most U.S. production. The method is of general applicability. It accounts for self-selectivity and simultaneity by expanding Heckman's two-step method, and the pesticide-deri ved demand and yield equations are theoretically consistent with a restricted profit function. The results support the notion that, among fresh market tomato growers, adopters of IPM for insects and IPM for diseases apply significant less insecticides and fungicides, respectively, than nonadopters. The effect of IPM adoption on yields and profits is less clear. "The Economics of Site Investigation for Groundwater Protection: An Application of a Sequential Search Strategy," M. Forsyth (Univ. of Guelph) Rehabilitation of areas of contaminated groundwater often involves significant costs for site investigation. Whether to undertake a site investigation and when to bring an ongoing investigation to a closure are questions facing decision makers at many contaminated sites across North America. A model based on the Variable Sample Sized Probability Ratio test is developed to determine when it is worthwhile investing time and money in a hydrogeological site investigation. In the event that a site investigation is undertaken, the model can be used to indicate when that investigation should be brought to a closure and which policy decision should subsequently be adopted. The model shows that the desirability of testing is sensitive to the cost-benefit ratio of undertaking remedial action and to the cost of testing. The methodology used in this paper has many potential applications in policy-making for the environment, including the evaluation of ecosystem and agroecosystem health. "Optimal Control for Groundwater Management," C.S. Kim and C.L. Sandretto (USDAIERS) Most dynamic models of groundwater management ignore groundwater return flows in estimating economic benefits from groundwater used for irrigation. This paper uses a corrected dynamic optimal control model to provide an empirical demonstration of the effects of model misspecification. Results indicate that misspecification of the model leads to overestimation of net economic benefits, excessive groundwater withdrawal, and a greater than optimal decline in the water table level. Abstracts of Selected Paperss of Selected Papers Consumer Labeling and Willingness to Pay in Market and Nonmarket Goods (Chair: Julie Caswell, Univ. of Massachusetts) 243 "Effectiveness of rBST Labeling and Willingness to Pay for rBST-Free Milk: Evidence from a Consumer Survey in Vermont," Q. Wang, C. Halbrendt, J. Kolodinsky, and F. Schmidt (Univ, of Vermont) This study examines the effectiveness of rBST labeling and willingness to pay for rBST-free milk in Vermont, which became the first state in the nation to adopt an rBST labeling law in April 1994. Results of a consumer survey suggest that the labeling law has had very limited impacts on milk consumption because many consumers were confused about the rBST labels. Estimation results of a twolimit Tobit model indicate that the willingness to pay for rBST-free milk is determined by a host of sociodemographic factors such as income and attitudes toward rBST. "Bid Design and Yea Saying in Single-Bounded, Dichotomous-Choice Questions," K.J. Boyle, H.F. MacDonald, H. Cheng (Univ, of Maine), and D.W. McCollum (U.S. Forest Service) Bid design in dichotomous-choice, contingentvaluation questions has been an issue of considerable concern and debate ever since the first application by Bishop and Heberlein in 1979. A number of researchers have proposed various systematic procedures to design bid structures, and despite the evolving literature on the optimal selection of bid levels and allocation of bids to the levels, questions remain. This study applies differing bid structures for the same contingent-valuation question to independent subsamples drawn from the same population. Simulations are conducted to discern how well the bid designs recover welfare estimates if people respond objectively to bid levels; the absence of a bid-magnitude effect. Our findings indicate that the systematic effect of bids on responses to dichotomous-choice questions reduces the effectiveness of the optimal design literature. Bias is reduced when bids are clustered around the mean, but welfare estimates are still affected by the presumed distributions that generate the bid designs. "Eco-Iabels and the Derived Demand for 'Green' Inputs: The Case of Textiles," K. Smith and J. Beghin (North Carolina State Univ.) This paper develops a framework for analyzing the market for eco-Iabeled textile products and the derived demand for "green" inputs used in the industry. The paper first provides a background on the use of eco-Iabels .in the textile industry and two important " green' , inputs used in the industry. Next, it presents a basic model for examining the demand for "green" textiles and the derived demand for" green" inpu