The effect of agricultural policies on land use and environmental quality

In this paper I consider the environmental quality gains that may be achieved by reducing agricultural income supports. A new methodology is developed to estimate land use shares. In an application to Wisconsin, milk price support reductions result in shifts of marginal agricultural land to forest, reducing soil erosion and providing off-site water quality improvements. The environmental benefits are estimated to be at least as large as the decreased welfare burden on consumers and taxpayers, indicating a central role for environmental quality considerations in motivating policy reforms and a more efficient means of achieving the environmental quality goals of land retirement programs.