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Abstract
We develop a two-stage, multinomial logit model of UK land use to investigate the impact of policy
changes upon agriculture. The model utilizes a large panel database covering the entirety of England
and Wales for 14 years between 1969 and 2004 integrated with the economic and physical
environment determinants of all major agricultural land use types. Our model performs well in out-of-sample
prediction of current land use and we use it to assess a proposed implementation of the Water
Framework Directive via a tax on fertilizer. Results indicate that such policy change would generate
substantial switching from arable to grassland systems, reducing significantly the amount of nitrate
leaching into UK water-bodies.