A Bivariate Approach to the Determination of Effective Pollution by Farm-households
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Following a bivariate probit approach and using the 1996 survey conducted by the Italian Institute
for the Studies of Agricultural Markets (ISMEA) in Italy, this study shows that the effective
pollution of Italian farm-households depends on both the actual level of pollution, calculated
using the OECD “Environmental Indicators for Agriculture” (1997, 1999, 2001a, b), as
well as the level of environmental concern, measured using the survey information about the
adoption of environmentally sensitivity technology and production techniques. Omission of
the level of environmental concern from the estimation of effective pollution probability yields
evidence of policy unfairness in the allocations of subsidies between farms. This evidence,
however, disappears when the level of actual pollution and environmental concern are estimated
jointly in a bivariate framework. In addition, the study shows that geographic location of
the farm, the common market organizations and the farm types play a significant roles in the
determination of the level of effective pollution.