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Agri-Environmental Policy and Moral Hazard under Output Price and Production Uncertainty

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Author Info
Yano, Y.
Blandford, D.
Abstract

Several theoretical and empirical models have been developed to examine how risk aversion affects compliance with agri-environmental schemes under asymmetric information and uncertainty. However, none has examined the case where the level of compliance is a continuous variable and producers face simultaneous monitoring, output price and production uncertainty. Treating conservation effort as a continuous variable, we show that risk aversion can mitigate the moral hazard problem in most cases. However, if conservation effort has a risk-increasing impact on production the effect of risk aversion on compliance is ambiguous.

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Publisher Info
Paper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 44323.

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Date of creation: 2008
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Handle: RePEc:ags:eaae08:44323

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Related research
Keywords: Agri-environmental schemes; uncertainty; moral hazard; Environmental Economics and Policy;

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References listed on IDEAS
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  1. Chongwoo Choe & Iain Fraser, 1999. "Compliance Monitoring and Agri-Environmental Policy," Journal of Agricultural Economics, Blackwell Publishing, vol. 50(3), pages 468-487. [Downloadable!] (restricted)
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  2. Loehman, Edna & Nelson, Carl, 1992. "Optimal Risk Management, Risk Aversion, And Production Function Properties," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(02), December. [Downloadable!]
  3. Harrington, Winston, 1988. "Enforcement leverage when penalties are restricted," Journal of Public Economics, Elsevier, vol. 37(1), pages 29-53, October. [Downloadable!] (restricted)
  4. Andrew Moxey & Ben White & Adam Ozanne, 1999. "Efficient Contract Design for Agri-Environment Policy," Journal of Agricultural Economics, Blackwell Publishing, vol. 50(2), pages 187-202. [Downloadable!] (restricted)
  5. Rob Fraser, 2002. "Moral Hazard and Risk Management in Agri-environmental Policy," Journal of Agricultural Economics, Blackwell Publishing, vol. 53(3), pages 475-487. [Downloadable!] (restricted)
  6. Rob Fraser, 2004. "On the Use of Targeting to Reduce Moral Hazard in Agri-environmental Schemes," Journal of Agricultural Economics, Blackwell Publishing, vol. 55(3), pages 525-540. [Downloadable!] (restricted)
  7. Spulber, Daniel F., 1988. "Optimal environmental regulation under asymmetric information," Journal of Public Economics, Elsevier, vol. 35(2), pages 163-181, March. [Downloadable!] (restricted)
  8. Wu, JunJie & Babcock, Bruce A., 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," Staff General Research Papers 1050, Iowa State University, Department of Economics.
  9. Bourgeon, Jean-Marc & Jayet, Pierre-Alain & Picard, Pierre, 1995. "An incentive approach to land set-aside programs," European Economic Review, Elsevier, vol. 39(8), pages 1487-1509, October. [Downloadable!] (restricted)
  10. Feder, Gershon, 1980. "Farm Size, Risk Aversion and the Adoption of New Technology under Uncertainty," Oxford Economic Papers, Oxford University Press, vol. 32(2), pages 263-83, July. [Downloadable!] (restricted)
  11. Friesen, Lana, 2003. "Targeting enforcement to improve compliance with environmental regulations," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 72-85, July. [Downloadable!] (restricted)
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