Conservation payments can be used to preserve forest and agroforest systems in developing countries. To explain landowners’ land-use decisions and determine the appropriate conservation payments, it is necessary to focus on risk associated with agricultural price and yield volatility. A theoretical framework is provided for assessing land-use allocation problems under risk and setting risk-efficient conservation payments when returns are not necessary normally distributed. Stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally-preferred land use dominates, even when land uses are not considered to be mutually exclusive. An empirical application to shaded-coffee protection in the biologically important El Chocó region of West Ecuador shows that conservation payments required for preserving shaded-coffee areas are much higher than those calculated under the assumption of risk-neutrality. Further, the extant distribution of land has a strong impact on the required conservation payments.
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Paper provided by University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group in its series Working Papers with number
2004-05.
Find related papers by JEL classification: C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry R14 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Land Use Patterns
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Catherine M. Chambers & Paul E. Chambers & John R. Crooker & John C. Whitehead, 2008.
"Stochastic Dominance, Entropy and Biodiversity Management,"
Working Papers
0807, University of Central Missouri, Department of Economics & Finance, revised May 2008.
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