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The Subsidy For Adopting Conservation Tillage: Estimation From Observed Behavior

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Author Info
Kurkalova, Lyubov
Kling, Catherine
Zhao, Jinhua

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Abstract

Due to payoff uncertainties combined with risk aversion and/or real options, farmers may demand a premium in order to adopt conservation tillage practices, over and above the compensation for the expected profit losses (if any). We propose a method of directly estimating the financial incentives for adopting conservation tillage and distinguishing between the expected payoff and the premium of adoption based on observed behavior. We find that the premium may play a significant role in farmers' adoption decisions. Even for non-adopters, conservation tillage provides a higher payoff than does conventional tillage on average, as agronomists have argued. However, non-adopters do not use conservation tillage because the expected profit gain alone does not fully compensate them for the uncertainties. To induce additional adoption, subsidies could be used. We find that in Iowa on average, the mean subsidy needed is $2.40 per acre per year for corn and $3.50 per acre per year for soybeans.

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Publisher Info
Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2001 Annual meeting, August 5-8, Chicago, IL with number 20542.

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Date of creation: 2001
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Handle: RePEc:ags:aaea01:20542

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Keywords: Land Economics/Use;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  4. Uri, Noel D., 1998. "Conservation tillage and the use of energy and other inputs in US agriculture," Energy Economics, Elsevier, vol. 20(4), pages 389-410, September. [Downloadable!] (restricted)
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  8. GR Pautsch & LA Kurkalova & BA Babcock & CL Kling, 2001. "The Efficiency Of Sequestering Carbon In Agricultural Soils," Contemporary Economic Policy, Western Economic Association International, vol. 19(2), pages 123-134, 04. [Downloadable!] (restricted)
  9. Pautsch, Gregory R. & Kurkalova, Lyubov A. & Babcock, Bruce A. & Kling, Catherine L., 2000. "Efficiency of Sequestering Carbon in Agricultural Soils (The)," Staff General Research Papers 1870, Iowa State University, Department of Economics. [Downloadable!]
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  10. Paul D. Mitchell, 1997. "Cost of Production System Budgets," Center for Agricultural and Rural Development (CARD) Publications 97-tr37, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  11. Cooper, Joseph C., 1997. "Combining Actual And Contingent Behavior Data To Model Farmer Adoption Of Water Quality Protection Practices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(01), July. [Downloadable!]
  12. Dimara, Efthalia & Skuras, Dimitrios, 1998. "Adoption of new tobacco varieties in Greece: Impacts of empirical findings on policy design," Agricultural Economics, Blackwell, vol. 19(3), pages 297-307, December. [Downloadable!] (restricted)
  13. Sunding, David & Zilberman, David, 2001. "The agricultural innovation process: Research and technology adoption in a changing agricultural sector," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 4, pages 207-261 Elsevier. [Downloadable!] (restricted)
  14. Allen M. Featherstone & Barry K. Goodwin, 1993. "Factors Influencing a Farmer's Decision to Invest in Long-Term Conservation Improvements," Land Economics, University of Wisconsin Press, vol. 69(1), pages 67-81. [Downloadable!] (restricted)
  15. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
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  17. Moschini, GianCarlo & Hennessy, David A., 2002. "Uncertainty, Risk Aversion, and Risk Management for Agricultural Producers," Staff General Research Papers 5323, Iowa State University, Department of Economics.
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  18. Claassen, Roger & Hansen, Leroy & Peters, Mark & Breneman, Vince & Weinberg, Marca & Cattaneo, Andrea & Feather, Peter & Gadsby, Dwight & Hellerstein, Daniel & Hopkins, Jeff & Johnston, Paul & Morehar, 2001. "Agri-Environmental Policy at the Crossroads: Guideposts on a Changing Landscape," Agricultural Economics Reports 33983, United States Department of Agriculture, Economic Research Service. [Downloadable!]
  19. Palsson, Anne-Marie, 1996. "Does the degree of relative risk aversion vary with household characteristics?," Journal of Economic Psychology, Elsevier, vol. 17(6), pages 771-787, December. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lyubov A. Kurkalova & Catherine L. Kling & Jinhua Zhao, 2003. "Multiple Benefits of Carbon-Friendly Agricultural Practices: Empirical Assessment of Conservation Tillage," Center for Agricultural and Rural Development (CARD) Publications 03-wp326, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  2. JunJie Wu & Richard M. Adams & Catherine L. Kling & Katsuya Tanaka, 2003. "Assessing the Costs and Environmental Consequences of Agricultural Land Use Changes: A Site-Specific, Policy-Scale Modeling Approach," Center for Agricultural and Rural Development (CARD) Publications 03-wp330, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
    Other versions:
  3. Kurkalova, Lyubov & Kling, Catherine L. & Zhao, Jinhua, 2003. "Multiple Benefits of Carbon-Friendly Agricultural Practices: Empirical Assessment of Conservation Tillage in Iowa," Staff General Research Papers 10194, Iowa State University, Department of Economics.
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