Alleviating soil erosion/pollution stock externalities: alternative roles for government

This paper addresses two temporal externalities due to agriculture: soil er osion and related pollution. The possibility of decentralization of decisio ns, the appropriate role of a resource manager, and the efficiency of alter native policies are examined using traditional welfare economics concepts f or a two-sector model of rural-urban linkage. Three alternative types of po licies can be socially efficient, but imply different involvement by govern ment, and have different knowledge requirements. A Pigouvian policy require s full information. A bargaining solution involves government only in setti ng an entitlement, but it may require too much knowledge by rural household s in terms of understanding dynamic environmental relationships. A third wa y is that government and rural households be co-producers of environmental goods. This concept assigns government the responsibility for maintaining k nowledge about environmental relationships, and government is a participant in a market system that determines prices for environmental-related goods. (C) 1999 Elsevier Science B.V. All rights reserved.