AGRICULTURAL PRICE, QUANTITY, AND WELFARE EFFECTS OF AIR QUALITY IMPROVEMENTS

The failure to allow for significant crop quality effects in a partial-equilibrium model can lead to misleading inferences about the price, output and welfare implications of air quality improvements. It has been observed that air pollutants such as ozone, sulphur dioxide, and nitrogen dioxide affect the yield and quality of many crops. The economic benefit from improving air quality in crop producing regions has been measured using a partial-equilibrium approach which accounts only for supply shifting yield effects. It is shown that a yield-effect only model will underestimate output increases and benefits from an air quality improvement when commodity quality improvements as well as yield increases are forthcoming.