Economic activity takes place in a scenario characterized by an increasing number of environmental regulations aimed at bringing under control the emission of contaminating wastes. In this paper, we evaluate the impact of transforming a code of good practice in nitrogen fertilization on Spanish citrus fruit farms into an environmental regulation of compulsory fulfilment. Using data envelopment techniques, we calculate unrestricted and environmentally regulated short-run maximum profits. Both profit values are then used to compute an index of the cost of regulation. Our results suggest that the cost of shifting from a merely recommended practice to a binding rule is low. On average, the loss of profit computed is only about 4%. Furthermore, we find that farms' overall efficiency is low and that the current gap between observed and regulated fertilization practices could be overcome by improving overall management efficiency.
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Document Type: Research Article
Universitat de València, Dpto. Economía Aplicada II, Avda dels Tarongers s/n, 46022 Valencia, Spain
Universitat de València Dpto. Economía Aplicada II and Instituto Valenciano de Investigaciones, Económicas IVIE, Guardia Civil, 22, 46020 Valencia, Spain
Publication date: 2006-06-20
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