ENDOGENOUS TECHNOLOGICAL-CHANGE AND POLLUTION-ABATEMENT

Nonpoint source pollution control is a more complicated process than t raditional analysis suggests. Whether a new pollution abatement techno logy is developed exogenously or endogenously and the per unit reducti on in the rate at which a pollutant associated with the use of a facto r of production needed to produce an agricultural commodity due to thi s technology enters the environment are critical factors in the determ ination of the effects of agricultural production on the pollutant sto ck. These are the issues addressed here. The optimal current period re search and development expenditures on an endogenously induced abateme nt technology associated with the use of a factor of production giving rise to environmental externalities are shown to be a function of, am ong other things, the cumulation of all research and development expen ditures, the probability of an abatement technology being developed, t he level of use of the factor of production, the unit pollution tax on the factor, the rate of time preference (discount rate), the rate at which the pollutant associated with the factor enters the environment, the rate of discharge of the pollutant stock, and so forth. Finally, the analysis demonstrates that a reduction in pollution by the adoptio n of an abatement technology may lead to an increase in the pollutant stock as a result of endogenous technological change associated with t he pollution abatement. When the rate of pollution reduction is greate r than a threshold, however, the adoption of an endogenously determine d abatement technology will unequivocally lead to a reduction in the p ollutant stock.