Effective cost-share rates and the distribution of social costs in the Rock Creek, Idaho, Rural Clean Water Project

David J. Walker; Dan T. Noble; Richard S. Magleby

ABSTRACT:

The effective federal cost-share rate for conservation practices often differs markedly from the nominal rate. The effective cost-share rate affects practice adoption, economic efficiency of the subsidy, and the distribution of water quality costs between public and private sectors. Using a linear programming model, this study estimates the effective federal cost-share rate and thus the distribution of water quality improvement costs for the Rock Creek Rural Clean Water Program watershed in Idaho. The federal government paid 62% of farmer cost through subsidies. The public share of total project costs is 84%, and the private share is only 16%. This effective federal cost-share rate of 84% compares to a nominal rate of 56%. The effective federal cost-share rate is likely higher than that required for economic efficiency. Government subsidies are instrumental under voluntary programs for encouraging farmer adoption of water quality practices.

Footnotes

David J. Walker is a professor and Dan T. Noble is a former graduate student, Department of Agricultural Economics, University of Idaho, Moscow 83843. Richard S. Magleby is an economist with the Economic Research Service, U.S. Department of Agriculture, Washington, D.C. 20250. This work was supported in part by a cooperative research agreement with the ERS, USDA. The cooperation of personnel at the Twin Falls SCS office and the Snake River Conservation Research Center is gratefully acknowledged.
Copyright 1990 by the Soil and Water Conservation Society

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