Regulating Pesticides in Greek Agriculture

The objective of this paper is to estimate the short run and long run own- price elasticity of pesticide demand in Greece in a profit maximization context. A single equation approach is adopted and the dynamic aspects of pesticide demand are captured by the use of cointegration techniques. The policy implications of the empirical findings concern the price responsiveness of pesticide demand in Greece to potential changes in pesticide price due to the imposition of an environmental tax on that polluting input. The estimated short run elasticity of pesticide demand is -0.8 whereas the long run estimate is slightly larger, approximately -0.9. The short run pesticide elasticity with respect to output price is 1.58 and the long run 1.75 both highly elastic estimates. The reduction of output prices may thus be expected to bring about a larger reduction in pesticide use than the imposition of a tax on that input.