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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.

Suggested Citation

  • Ing-Marie Gren, 2004. "Uniform or discriminating payments for environmental production on arable land under asymmetric information," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 31(1), pages 61-76, March.
    • Handle: RePEc:oup:erevae:v:31:y:2004:i:1:p:61-76
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    Cited by:

    1. Carpentier, Alain & Gohin, Alexandre & Sckokai, Paolo & Thomas, Alban, 2015. "Economic modelling of agricultural production: past advances and new challenges," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 96(01), pages 131-165, March.
    2. Canton, Joan & De Cara, Stéphane & Jayet, Pierre-Alain, 2009. "Agri-environmental schemes: Adverse selection, information structure and delegation," Ecological Economics, Elsevier, vol. 68(7), pages 2114-2121, May.
    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. 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.
    5. Säll, Sarah & Gren, Ing-Marie, 2015. "Effects of an environmental tax on meat and dairy consumption in Sweden," Food Policy, Elsevier, vol. 55(C), pages 41-53.
    6. Crepin, Anne-Sophie, 2005. "Incentives for wetland creation," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 598-616, November.

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