A Bivariate Approach to the Determination of Effective Pollution by Farm-households

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.