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On the use of targeting to reduce moral hazard in agri-environmental schemes

  • Fraser, Rob W.

This paper investigates the role of targeting in the context of agri-environmental schemes involving monitoring and penalties and well suited to a geographically-based distinction between participants. By separating participants into a target and a non-target group the aim of targeting is to reduce the moral hazard problem. The paper analyses three approaches to targeting and the focus is on reducing the extent of cheating by participants in the non-target group. By complementing the adoption of targeting with appropriate adjustments to the monitoring/penalty parameters it is shown how such an approach can exploit the risk aversion of participants to completely eliminate cheating by those participants in the non-target group.

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File URL: http://purl.umn.edu/57867
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Paper provided by Australian Agricultural and Resource Economics Society in its series 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia with number 57867.

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Date of creation: Feb 2003
Date of revision:
Handle: RePEc:ags:aare03:57867
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  1. Fraser, Rob W., 2001. "Using Principal-Agent Theory to Deal with Output Slippage in the European Union Set-Aside Policy," 2001 Conference (45th), January 23-25, 2001, Adelaide 125632, Australian Agricultural and Resource Economics Society.
  2. Fraser, Rob W., 2002. "Moral Hazard and Risk Management in Agri-Environmental Policy," 2002 Conference (46th), February 13-15, 2002, Canberra 125086, Australian Agricultural and Resource Economics Society.
  3. Braeutigam, Ronald R & Panzar, John C, 1993. "Effects of the Change from Rate-of-Return to Price-Cap Regulation," American Economic Review, American Economic Association, vol. 83(2), pages 191-98, May.
  4. repec:ltr:wpaper:1997.08 is not listed on IDEAS
  5. Andrew Moxey & Ben White & Adam Ozanne, 1999. "Efficient Contract Design for Agri-Environment Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 187-202.
  6. Chongwoo Choe & Iain Fraser, 1997. "Compliance Monitoring and Agri-Environmental Policy," Working Papers 1997.08, School of Economics, La Trobe University.
  7. Rob Fraser & Hild Rygnestad, 1999. "An Assessment of the Impact of Implementing the European Commission's "Agenda 2000" Cereal Proposals for Specialist Wheatgrowers in Denmark," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 328-335.
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