Moral Hazard, Targeting and Contract Duration in Agri‐Environmental Policy
This paper extends the multi-period agri-environmental contract model of Fraser (2004) so that it contains a more realistic specification of the inter-temporal penalties for noncompliance, and therefore of the inter-temporal moral hazard problem in agri-environmental policy design. On this basis it is shown that a farmer will have an unambiguous preference for cheating early over cheating late in the contract period based on differences in the expected cost of compliance. It is then shown how the principal can make use of this unambiguous preference to target monitoring resources intertemporally, and in so doing, to encourage full contract duration compliance.
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Volume (Year): 63 (2012)
Issue (Month): 1 (02)
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References listed on IDEAS
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- Rob Hart, 2005. "Combating moral hazard in agri-environmental schemes: a multiple-agent approach," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(1), pages 75-91, March.
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1997.08, School of Economics, La Trobe University.
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- Chongwoo Choe & Iain Fraser, 1997. "Compliance Monitoring and Agri-Environmental Policy," Working Papers 1997.08, School of Economics, La Trobe University.
- Rob Fraser, 2004.
"On the Use of Targeting to Reduce Moral Hazard in Agri-environmental Schemes,"
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Wiley Blackwell, vol. 55(3), pages 525-540.
- Fraser, Rob W., 2003. "On the use of targeting to reduce moral hazard in agri-environmental schemes," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57867, Australian Agricultural and Resource Economics Society.
- Heyes, Anthony, 2000. "Implementing Environmental Regulation: Enforcement and Compliance," Journal of Regulatory Economics, Springer, vol. 17(2), pages 107-129, March.
- Adam Ozanne & Ben White, 2007. "Equivalence of Input Quotas and Input Charges under Asymmetric Information in Agri-environmental Schemes," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(2), pages 260-268, 06.
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