2017 CARD Award for Best Ph.D. Dissertation in Agricultural, Environmental, and Energy Economics and Policy

Three essays on environmental economics and intra-household decision making

María Jimena González Ramírez

Iowa State University

Water pollution is an increasing problem in the United States, and agriculture substantially contributes pollution discharges into water streams. Some of these nutrients are responsible for a large “dead” zone in the Gulf of Mexico, increasing nitrate levels in drinking water, and pervasive damages to recreational amenities. Since agriculture falls outside regulatory control under the Clean Water Act, several voluntary environmental programs have been created to improve water quality. In my dissertation, I study the design and effectiveness of conservation programs directed at reducing water pollution from agricultural sources. By studying the theoretical design of environmental programs for pollutants that are complements, Chapter 1 connects with CARD’s research on environmental policy alternatives. Chapter 2 contains an empirical assessment of a payment program to increase the adoption of a new pollution abatement technology in Iowa, which relates to CARD’s focus on the impact of environmental policies at the state level. Besides environmental policy I am also interested in intra-household dynamics in developing countries. By understanding household expenditure decisions, policy makers can better address development obstacles. In Chapter 3, I study intra-household differences in risk preferences, female bargaining power, and the way these affect household education and medical expenditure decisions in rural Cameroon. This work connects with CARD’s rural development focus at an international level.

My interest in the design of environmental programs for pollutants that are complements is motivated by the current state of the literature. There is a lack a consensus on whether program participants should be compensated for reductions of both pollutants, which is commonly referred to as double-dipping or stacking (Woodward 2011). My contribution to the literature is to further expand the understanding of different environmental program designs (e.g. prices versus quantities (Ambec & Coria 2011, Weitzman 1974)). I build my theoretical framework on Woodward’s model and expand it to consider more policy designs. I show that the curvature of the marginal benefit curves favors the usage of prices versus quantities, not ruling out prices with stacking. By understanding different environmental program designs, policy makers can design better programs that attain pollution abatement more efficiently, which fits with CARD’s environmental policy research area.

For the second chapter, I study the effectiveness of a subsidy program to increase the adoption a new pollution abatement technology, cover crops, among Iowa farmers. I study the effectiveness of cost-share funding in diffusing cover crops using a unique longitudinal dataset of large Iowa farm operations. Unlike previous U.S. cover crops studies, my dataset allows me to match treatment and control farmers based on pre-funding characteristics, which is fundamental for having a valid counterfactual. Using propensity score matching and a Tobit estimator to correct for non-adoption, I find that the subsidy program is effective and that it increases cover crops acres and the proportion of cover crops relative to total farm acreage among both subsidy recipients and adopters of the new technology. These results have critical implications for finding solutions to address persistent water quality problems with limited conservation budgets. This chapter also connects with CARD’s environmental research area, and it focuses on the impact of an environmental policy in Iowa.

In Chapter 3, I study intra-household and gender differences in risk preferences using data from 1679 households in rural Cameroon. Results from a survey and an artefactual field experiment (Holt and Laury 2002) in which husband and wife first participate individually and then jointly as a couple are used to answer the following questions: (i) Are there differences in risk preferences between husbands and wives within households?; (ii) are there differences in the relative influence of each spouse over joint decisions involving risk?; and (iii) how does this relative influence affect households’ educational and medical expenditure decisions? I find evidence of risk aversion among husbands, wives, and couples (i.e. husband and wife together) on average, in which husbands are more risk averse than wives and couples. Using a proxy for female bargaining power, I find that monogamous wives are more likely to be more empowered than polygamous wives. Lastly, the proxy for female bargaining power is positively correlated with educational and medical expenditures. These results provide a deeper insight into intra-household dynamics, which inform policy-makers and support the generation of more effective development strategies in the region. This chapter connects with CARD’s rural development focus.

To summarize, Chapter 1 and 2 relate to CARD’s environmental policy research area at a general level and at the state level respectively. Chapter 3 is connected to CARD’s rural development focus at an international level.