Exploring the connections between participation in and benefits from payments for hydrological services programs in Veracruz State, Mexico

Payments for hydrological services (PHS) programs are expected to confer tangible benefits to households. Impact evaluations of PHS programs, however, find few to no changes in material indicators. One reason for this may be that non-financial motivations and benefits—including environmental or social—influence participation and are important outcomes for households participating in PHS programs. In this paper we test this hypothesis using 56 interviews and 181 surveys from households in Veracruz State, Mexico. Using logistic regression models we find that human, natural, physical and financial capital are important to the decision to participate in PHS, but so are pro-social and pro-environmental motivations. Using counterfactual impact evaluation methods we find few changes in material benefits but do find that PHS participants are more likely to report positive changes in their household and community quality of life over the last five years compared to households not participating in PHS programs. Qualitative information supports these findings. Our results contribute to the evolving theory on PHS that participation is driven by a mix of financial and non-financial motivations and that non-material benefits are an important outcome of these programs.