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Abstract

Microeconomic studies often make two assumptions: 1) producers focus on profit maximization, disregarding "external" environmental and health costs; and 2) producers have full information about their production processes and markets. This study examines whether these assumptions are valid for the herbicide use decisions of Michigan corn growers. It further examines corn growers' willingness to pay for reductions in risk associated with the use of herbicide safety characteristics. The approach used involves a mail survey designed to simulate the market for herbicide formulations described as identical to atrazine except that the "new" herbicide formulations are described as a) not carcinogenic to humans, b) not leachable into groundwater, or c) nontoxic to fish. Respondents were asked a variety of questions about their farms, herbicide use, information sources, and their knowledge and opinions of health and environmental effects of atrazine. A double-hurdle model is used to estimate demand for the "new" formulations. From this, willingness to pay is estimated. As predicted by theory and indicated by previous studies, willingness to pay for risk reductions associated with each of the three safety attributes was positive. Results indicate that mean willingness to pay for source reduction in leaching risk from atrazine is $4.40 per acre for 40 acres and is$4.92 per acre for the carcinogenicity risks. While the average respondent would not demand 40 acres of source reduction in fish toxicity risk from atrazine, mean willingness to pay for 30 acres is $3.92 per acre. For the non-leaching formulation, this result indicates the average respondent would pay a premium of$4.40 cents per acre to purchase 40 acres of an atrazine alternative proven to be non-leaching. As atrazine is typically applied at a cost of \$3.00 per acre, these premiums are significant. The range of willingness to pay estimates for the three aspects of health and environmental quality examined by this research suggest that farmers are more concerned about on-farm health and environmental effects than about off-farm effects. For each of the quantities examined here, per acre willingness to pay for reductions in fish toxicity risks was less than that associated with reductions in leaching and carcinogenicity risks. Cancer and leaching are generally on-farm effects, while harmful effects to fish tend to occur "downstream." The mean levels of adoption for the three attributes also confirm this. Over 40 percent of respondents indicated they would use some of the non-leaching and non-carcinogenic attributes, while only 25 percent indicated similar intentions for the fish-safe attribute. The results for the non-leaching attribute allowed testing of the hypothesis that willingness to pay increases with knowledge of the potential of atrazine to leach. The empirical results suggest that average willingness to pay for reductions in the leaching risk from atrazine would increase by approximately 9 percent if all farmers were fully informed of the leaching potential of atrazine.