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Conservation Payments under Risk: A Stochastic Dominance Approach

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  • Pablo C. Ben�tez
  • Timo Kuosmanen
  • Roland Olschewski
  • G. Cornelis van Kooten

Abstract

Conservation payments can be used to preserve forest and agroforest systems. To explain landowners' land-use decisions and determine appropriate conservation payments, it is necessary to focus on revenue risk. Marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates. An empirical application to shaded coffee protection in the biologically important Choc� region of West Ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk-neutral assumptions. Further, the extant distribution of land has strong impacts on the required payments. Copyright 2006, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00835.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 88 (2006)
Issue (Month): 1 ()
Pages: 1-15

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Handle: RePEc:oup:ajagec:v:88:y:2006:i:1:p:1-15

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Cited by:
  1. Ian A. MacKenzie & Markus Ohndorf & Charles Palmer, 2012. "Enforcement-proof contracts with moral hazard in precaution: ensuring 'permanence' in carbon sequestration," Oxford Economic Papers, Oxford University Press, vol. 64(2), pages 350-374, April.
  2. Nana, Tian & Lu, Fadian, 2013. "Adaptive management decision of agroforestry under timber price risk," Journal of Forest Economics, Elsevier, vol. 19(2), pages 162-173.
  3. Engel, Stefanie & Pagiola, Stefano & Wunder, Sven, 2008. "Designing payments for environmental services in theory and practice: An overview of the issues," Ecological Economics, Elsevier, vol. 65(4), pages 663-674, May.
  4. Kitti, Mitri & Heikkilä, Jaakko & Huhtala, Anni, 2009. "‘Fair’ policies for the coffee trade – protecting people or biodiversity?," Environment and Development Economics, Cambridge University Press, vol. 14(06), pages 739-758, December.
  5. Stefanie Engel & Charles Palmer & Luca Taschini & Simon Urech, 2012. "Cost-effective payments for reducing emissions from deforestation under uncertainty," LSE Research Online Documents on Economics 44837, London School of Economics and Political Science, LSE Library.
  6. Catherine M. Chambers & Paul E. Chambers & John R. Crooker & John C. Whitehead, 2008. "Stochastic Dominance, Entropy and Biodiversity Management," Working Papers 0807, University of Central Missouri, Department of Economics & Finance, revised May 2008.
  7. Marcella Veronesi & Tim Schloendorn & Astrid Zabel & Stefanie Engel, 2012. "Designing Redd+ Schemes When Forest Users Are Not Forest Landowners: Evidence From A Survey-Based Experiment In Kenya," Working Papers 15/2012, University of Verona, Department of Economics.
  8. Levy, Moshe, 2009. "Almost Stochastic Dominance and stocks for the long run," European Journal of Operational Research, Elsevier, vol. 194(1), pages 250-257, April.
  9. Knoke, Thomas & Steinbeis, Otto-Emmanuel & Bösch, Matthias & Román-Cuesta, Rosa María & Burkhardt, Thomas, 2011. "Cost-effective compensation to avoid carbon emissions from forest loss: An approach to consider price-quantity effects and risk-aversion," Ecological Economics, Elsevier, vol. 70(6), pages 1139-1153, April.
  10. Charles Palmer & Markus Ohndorf & Ian A. MacKenzie, 2009. "Life’s a breach! Ensuring ‘permanence’ in forest carbon sinks under incomplete contract enforcement," CER-ETH Economics working paper series 09/113, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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