The effect of result‐based agri‐environmental payments on biodiversity: Evidence from Switzerland

We estimate the effects of result‐based agri‐environmental payments on biodiversity using a unique dataset containing information about plant vegetation. The data include information on surveyed plant species for a large number of randomly selected plots followed over a period of 20 years in Switzerland. In our estimation, we utilize a difference‐in‐discontinuities approach based on exogenous variation in payments triggered by (i) a policy reform in Switzerland that led to a considerable increase in payments that was uncertain prior to the implementation and (ii) an administrative threshold of reform that defines eligibility for payment depending on the botanical quality. We find that the increase in result‐based payments led to an increase in the biodiversity of plots that were almost eligible for the payments before the reform but not for plots that already satisfied the eligibility criteria. Our findings have important implications for the design of result‐based payments.