This paper estimates the dynamic relationship among conservation policy, water quality,
and local income using county-year data on USDA Environmental Quality Incentives Program
(EQIP) spending, nitrogen concentration, and income. We develop a five-stage identification
strategy that combines two-way fixed effects, pre-program double/debiased machine learning
residualization, instrumental variables, a triangular 3SLS system, local projections, and a longrun
decomposition of direct and income-feedback channels. Preliminary results show that EQIP
water-practice spending has a negative but statistically insignificant contemporaneous effect on
nitrogen concentration. Local projection estimates provide limited evidence of persistent pollution
reductions. However, alternative specifications that restrict the sample to later stages of
the program, particularly the post-1996 and post-2001 periods, suggest that EQIP is associated
with a small but persistent increase in county income. The income-feedback channel may contribute
to an initial increase in county-level pollution, and these results hold after controlling
for upstream nitrogen pollution and population changes.
