ANALIZING WATER FRAMEWORK DIRECTIVE IMPACTS USING A MULTINOMIAL LOGIT LAND USE MODEL

We develop a two-stage, multinomial logit model of UK land use to investigate the impact of policychanges upon agriculture. The model utilizes a large panel database covering the entirety of Englandand Wales for 14 years between 1969 and 2004 integrated with the economic and physicalenvironment determinants of all major agricultural land use types. Our model performs well in out-of-sampleprediction of current land use and we use it to assess a proposed implementation of the WaterFramework Directive via a tax on fertilizer. Results indicate that such policy change would generatesubstantial switching from arable to grassland systems, reducing significantly the amount of nitrateleaching into UK water-bodies.