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Conservation Payments under Risk: A Stochastic Dominance Approach

Author

Listed:
  • Pablo C. Benítez
  • Timo Kuosmanen
  • Roland Olschewski
  • G. Cornelis van Kooten

Abstract

Conservation payments can be used to preserve forest and agroforest systems. To explain landowners' land-use decisions and determine appropriate conservation payments, it is necessary to focus on revenue risk. Marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates. An empirical application to shaded coffee protection in the biologically important Chocó region of West Ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk-neutral assumptions. Further, the extant distribution of land has strong impacts on the required payments. Copyright 2006, Oxford University Press.

Suggested Citation

  • Pablo C. Benítez & Timo Kuosmanen & Roland Olschewski & G. Cornelis van Kooten, 2006. "Conservation Payments under Risk: A Stochastic Dominance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 1-15.
    • Handle: RePEc:oup:ajagec:v:88:y:2006:i:1:p:1-15
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00835.x
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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • 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
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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