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Uniform or discriminating payments for environmental production on arable land under asymmetric information

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  • Ing-Marie Gren

Abstract

Uniform payments are often made to farmers for providing environmental goods (e.g. wetland or semi-natural landscape) on arable land. Assuming hidden information on farmers' costs of converting land for environmental purposes, this paper investigates under what conditions a uniform policy (flat-rate payment) is better than a more sophisticated mechanism that reflects provision costs. A simplified analytical case shows indeterminate results. The ranking of net benefits under the two policies depends on the relationship between the second derivatives of the environmental value and cost functions. A numerical demonstration of arable conversion to wetland in southwestern Sweden shows that net benefits under the two policies can differ significantly. Copyright 2004, Oxford University Press.

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Bibliographic Info

Article provided by Foundation for the European Review of Agricultural Economics in its journal European Review of Agricultural Economics.

Volume (Year): 31 (2004)
Issue (Month): 1 (March)
Pages: 61-76

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Handle: RePEc:oup:erevae:v:31:y:2004:i:1:p:61-76

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Cited by:
  1. Scharin, Henrik, 2004. "Management of eutrophicated coastal zones," Department of Economics publications 717, Swedish University of Agricultural Sciences, Department of Economics.
  2. Joan Canton & Stephane De Cara & Pierre-Alain Jayet, 2009. "Agri-environmental schemes: Adverse selection, information structure and delegation," Working Papers 31130, Institut National de la Recherche Agronomique, France.
  3. Signe Anthon & Serge Garcia & Anne Stenger, 2006. "Incentive Contracts for Natura 2000 Implementation: A Mixed Model of Adverse Selection and Moral Hazard," Working Papers - Cahiers du LEF 2006-06, Laboratoire d'Economie Forestiere, AgroParisTech-INRA.
  4. Crepin, Anne-Sophie, 2005. "Incentives for wetland creation," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 598-616, November.
  5. Bartolini, Fabio & Gallerani, Vittorio & Raggi, Meri & Viaggi, Davide, 2005. "Contract Design and Targeting for the Production of Public Goods in Agriculture: The Impact of the 2003 Cap Reform," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24559, European Association of Agricultural Economists.

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