A Bayesian Approach to Analyzing the Economic Costs of Environmental Regulation in U.S. Dairy Farming

This paper develops a comprehensive pollution index based on EPA (2009) methodologies, which contrasts with previous studies that rely on partial measures based only on surplus nitrogen stemming from the over-application of fertilizer. Second, it uses a directional output distance function on a Bayesian framework, to generate empirical estimates of the economic impact associated with hypothetical environmental regulations in the dairy sector. Results indicate that on average, values of foregone output following regulatory intervention lead to revenue losses ranging from 1.8% to 13.1% across different regions between 1978 and 2007.