Incentive Contracts for Natura 2000 Implementation: A Mixed Model of Adverse Selection and Moral Hazard
AbstractThe implementation of nature conservation policy in the EU is often based on contracts between public authorities and landowners. We model these contracts in the presence of adverse selection and moral hazard when the outcome is uncertain. The results show that agents, who have high probability to reach a higher level of conservation, should be offered a contract where transfers depend on the final outcome with a bonus for a high state. When conservation measures are correlated with forest management, we show that the contractual measures involve distorded tranfers. Finally, we analyze the payment mechanisms used in France and Denmark and show that these mechanisms result in overcompensation and underperformance since they do not take the problem of moral hazard and natural variability into account.
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Bibliographic InfoPaper provided by Laboratoire d'Economie Forestiere, AgroParisTech-INRA in its series Working Papers - Cahiers du LEF with number 2006-06.
Length: 37 pages
Date of creation: Oct 2006
Date of revision:
Natura 2000; Forest; Contracts; Mixed model; Adverse selection; Moral hazard.;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
- Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
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