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Assessing the Role of Policy and Income in Improving Water Quality and Property Value

Paper Session

Friday, Jan. 6, 2023 12:30 PM - 2:15 PM (CST)

New Orleans Marriott
Hosted By: Agricultural and Applied Economics Association
  • Chair: Spiro Stefanou, U.S. Department of Agriculture

Decomposition Analysis of the Role of Income and Policy on Water Pollution in the United States

James C. Davis
U.S. Department of Agriculture
Krishna P. Paudel
U.S. Department of Agriculture
Anil Rupasingha
U.S. Department of Agriculture


We investigate the effects of income and policy on water pollution in U.S. counties. We
estimate the effect of county changes in income and U.S. Clean Water Act and USDA Rural
Development grant awards to municipal water districts on water pollution outcomes.
Following Paudel & Crago (2020), we use watershed-level panel data on nitrogen,
phosphorus pollution, and dissolved oxygen readings for our water pollution measures.
These data are constructed for detailed US Geological Survey (USGS) hydrologic units
(eight-digit HU), approximately 2,200 geographic areas representing part or all of surface
drainage basins, a combination of drainage basins, or a distinct hydrologic feature. Water
quality data are from the Water Quality Portal maintained by the USGS, EPA, and
National Water Quality Monitoring Council. These data link to approximately 2,400 U.S.
counties for which income data are taken from the Bureau of Economic Analysis (BEA)
Gross Domestic Product (GDP) by County series and population from the Census Bureau
Local Area Unemployment Statistics (LAUS) series. Data on grants to municipal
wastewater treatment plants are derived from the EPA Grants Information and Control
System (GICS) (see Keiser & Shapiro 2018) and USDA Rural Development grant award
lists. To separate the effects, we employ a synthetic control method which combines elements
from matching and difference-in-differences techniques. It allows us to systematically select
comparison groups of counties and weight the control group to better match the treatment
group before the water abatement intervention. Thus, as usual with difference-in-difference
methods, we expect a tight pre-trend alignment between our control and treated counties,
followed by a divergence in water pollution and its determinants following implementations
of water pollution abatement policies.

Local Economic Benefits of the Environmental Quality Incentives Program: Evidence from Rural Housing Markets

Wei Zhang
Virginia Tech
Pengfei Liu
University of Rhode Island


Quantitative assessment of the economic benefits of agricultural conservation programs is
important for evaluating the overall efficiency of the programs. Past research focuses on
farmers’ adoption and the environmental and production impact of conservation practices,
and rarely studies potential economic benefits of conservation program participation and
implementation. In this research, we estimate the local economic benefits of the
Environmental Quality Incentive Program (EQIP) using individual property transaction
data in rural U.S. Our preliminary results suggest that the implementation of EQIP has a
significantly positive impact on rural housing markets. We also examine the amenity
channels through which EQIP affects housing price, including water quality, air quality,
and wildlife habitats. Furthermore, we demonstrate significant heterogeneity in economic
benefits across counties with different socioeconomic characteristics. Our results have
important policy implications for the assessment of conservation programs: we compare the
benefits of EQIP through housing markets and its costs and highlight the positive effects of
the program on the rural economy.

Estimating the Impact of Cover Crops and Conservation Tillage Adoption on Ambient Water Quality in the Upper Mississippi River Drainage

Benjamin Gramig
U.S. Department of Agriculture
Hsin-Chieh Hsieh
University of Illinois-Urbana-Champaign


Agricultural conservation practices have long been promoted for different resource
conservation and environmental benefits. We examine conservation tillage and cover crops
adoption together with ambient water quality to estimate the influence these soil health
practices have had on non-point source pollution from agriculture. We use remotely sensed
data on practice adoption and control for the direction of hydrological flow, weather, and
land use to econometrically measure the impact of each practice on water quality outcomes
while controlling for pollutant inflow from upstream. The spatial unit of analysis is a HUC-
8 also examined in other recent research using different treatment variables to explain
variation in surface water quality. Our results provide novel estimates based on observed
data that can be compared to more common biophysical simulations of conservation practice

Sheila Olmstead
University of Texas-Austin
JEL Classifications
  • Q0 - General