The relative efficiency of voluntary vs mandatory environmental regulations

Increased use of voluntary programs for environmental protection as an alte rnative to mandatory approaches raises the issue of the relative efficiency of the two approaches. This paper analyzes the efficiency of voluntary pro grams relative to mandatory programs in agriculture. Under the voluntary pr ogram producers adopt a land conservation practice and, in turn, the govern ment provides technical and financial assistance. The voluntary program is more efficient than a program that mandates adoption if and only if the dea dweight losses of government expenditures under the voluntary program are l ess than the difference between private and public costs of government serv ices plus the additional implementation costs of the mandatory program. Thi s necessary and sufficient condition is more likely to be satisfied when (a ) the deadweight loss from raising government revenue is zero or small, (b) government services are less rival, (c) the costs of government services a re lower than what farmers would have to pay for equivalent private service s, (d) the number of farms in the program is large, and (e) the saving in i mplementation costs under the voluntary program is large and increases rapi dly with program acreage. (C) 1999 Academic Press.