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Simulating the Effects of a Green Payment Program on the Diffusion Rate of a Conservation Technology

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  • Baerenklau, Kenneth A.
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    Abstract

    The decision to adopt a potentially profitable but unfamiliar conservation technology is cast in a multi-period Bayesian framework. Specifically, dairy farmers who are both risk-averse and susceptible to peer group influence progressively learn about the true impact of adopting reduced phosphorus dairy diets on their income distributions as they repeatedly experiment with this new technology. Empirically calibrated simulations are used to examine the effects of a voluntary green payment program on the rate of technological diffusion. Results suggest that (a) green payments can accelerate learning and produce significant, permanent changes in behavior relatively quickly and for a reasonable cost; (b) shorter contracts offering larger incentives may be more cost-effective when learning plays an important role in behavioral change; and (c) unknown prior beliefs can reduce the efficacy of a green payment program, implying efforts to verify these priors or to ensure against them by increasing the payment level may be worthwhile.

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    Bibliographic Info

    Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

    Volume (Year): 33 (2004)
    Issue (Month): 1 (April)
    Pages:

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    Handle: RePEc:ags:arerjl:31375

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    Keywords: Environmental Economics and Policy;

    References

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    1. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers 1488, Iowa State University, Department of Economics.
    2. Nagubadi, Venkatarao & McNamara, Kevin T. & Hoover, William L. & Mills, Walter L., Jr., 1996. "Program Participation Behvaior Of Nonindustrial Forest Landowners: A Probit Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 28(02), December.
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    8. Joseph C. Cooper & Russ W. Keim, 1996. "Incentive Payments to Encourage Farmer Adoption of Water Quality Protection Practices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(1), pages 54-64.
    9. Isik, Murat & Khanna, Madhu, 2002. "Stochastic Technology, Risk Preferences And Adoption Of Site-Specific Technologies," 2002 Annual meeting, July 28-31, Long Beach, CA 19858, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:
    1. Whitten, Stuart M. & Reeson, Andrew & Windle, Jill & Rolfe, John, 2008. "Barriers to and Opportunities for Increasing Participation in Conservation Auctions," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 5973, Australian Agricultural and Resource Economics Society.

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