Agricultural practices adjustments to policies aiming to decrease water pollution from agriculture

Policies that aim to mitigate water pollution from fertilizer use in agriculture include input-based and output-based policies. Both cost-effectiveness and the speed for policies to take effect are important for policy assessment. In this study, we found that fertilizer price policies cannot decrease fertilizer use significantly due to the insignificant effect of fertilizer price on fertilizer use. Contrarily, the fertilizer use is elastic to output price, and policies that impose tax on corn production or subsidize soybean production or both are able to mitigate water pollution form fertilizer use significantly. Policies that can increase labor supply in planting season may also have strong effect on mitigation of water pollution. The slow adjustment rate of land allocation suggests that policies that affect fertilizer use through motivating farmers’ land allocation adjustment from fertilizer-intensive crop to fertilizer-saving crop may be time costly.