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Land Heterogeneity, Agricultural Income Forgone and Environmental Benefit: An Assessment of Incentive Compatibility Problems in Environmental Stewardship Schemes

Author

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  • Fraser, Rob W.

Abstract

This paper examines the issue of incentive-compatibility within environmental stewardship schemes where incentive payments to farmers to provide environmental goods and services are based on foregone agricultural income. The particular focus of the paper is on the role of land heterogeneity, whether in terms of agricultural value or environmental value, in leading to divergences between the actual and the socially optimal level of provision of environmental goods and services. It is shown that such goods and services are systematically over or under-provided depending on the characteristics of land heterogeneity both within and between landscape regions. It is therefore concluded that incentive payments should be based on social willingness-to pay for the provision of environmental goods and services.

Suggested Citation

  • Fraser, Rob W., 2008. "Land Heterogeneity, Agricultural Income Forgone and Environmental Benefit: An Assessment of Incentive Compatibility Problems in Environmental Stewardship Schemes," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6038, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare08:6038
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    References listed on IDEAS

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    1. 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.
    2. Hild Rygnestad & Rob Fraser, 1996. "Land Heterogeneity And The Effectiveness Of Cap Set-Aside," Journal of Agricultural Economics, Wiley Blackwell, vol. 47(1-4), pages 255-260.
    3. R. Fraser, 1993. "Set-Aside Premiums And The May 1992 Cap Reforms," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(3), pages 410-417.
    4. David R. Harvey, 2003. "Agri-environmental Relationships and Multi-functionality: Further Considerations," The World Economy, Wiley Blackwell, vol. 26(5), pages 705-725, May.
    5. Danny Campbell, 2007. "Willingness to Pay for Rural Landscape Improvements: Combining Mixed Logit and Random-Effects Models," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(3), pages 467-483, September.
    6. Robert J. Johnston & Joshua M. Duke, 2007. "Willingness to Pay for Agricultural Land Preservation and Policy Process Attributes: Does the Method Matter?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 1098-1115.
    7. Rob Fraser, 2002. "Moral Hazard and Risk Management in Agri-environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 475-487.
    8. 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.
    9. JunJie Wu & Bruce A. Babcock, 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 935-945.
    10. Nick Hanley & Sergio Colombo & Pamela Mason & Helen Johns, 2007. "The Reform of Support Mechanisms for Upland Farming: Paying for Public Goods in the Severely Disadvantaged Areas of England," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(3), pages 433-453, September.
    11. D. Roberts & J. Froud & R. W. Fraser, 1996. "Participation In Set Aside: What Determines The Opting In Price?," Journal of Agricultural Economics, Wiley Blackwell, vol. 47(1-4), pages 89-98.
    12. Knowler, Duncan & Bradshaw, Ben, 2007. "Farmers' adoption of conservation agriculture: A review and synthesis of recent research," Food Policy, Elsevier, vol. 32(1), pages 25-48, February.
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    Citations

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    Cited by:

    1. Vincent Martinet, 2012. "Effect of soil heterogeneity on the welfare economics of biofuel policies," Working Papers 2012/01, INRA, Economie Publique.
    2. Rob Fraser, 2013. "To Cheat or Not To Cheat: Moral Hazard and Agri-environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(3), pages 527-536, September.
    3. Emmanuelle Quillérou & Rob Fraser, 2010. "Adverse Selection in the Environmental Stewardship Scheme: Does the Higher Level Stewardship Scheme Design Reduce Adverse Selection?," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 369-380.
    4. Laure Kuhfuss & Florence Jacquet & Raphaële Preget & Sophie Thoyer, 2012. "Le dispositif des MAEt pour l’enjeu eau : une fausse bonne idée ?," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 93(4), pages 395-422.
    5. Salas, Paula Cordero & Roe, Brian E. & Sohngen, Brent, 2012. "Addressing Additionality in REDD Contracts when Formal Enforcement is Absent," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124505, Agricultural and Applied Economics Association.
    6. Laure Kuhfuss & Julie Subervie, 2015. "Do agri-environmental schemes help reduce herbicide use? Evidence from a natural experiment in France," Post-Print hal-01199067, HAL.
    7. Sahrbacher, Amanda, 2012. "Impacts of CAP reforms on farm structures and performance disparities: An agent-based approach," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 65, number 65.
    8. repec:eee:ecolec:v:149:y:2018:i:c:p:202-211 is not listed on IDEAS
    9. Huber, Robert & Lehmann, Bernard, 2010. "Economies of Scope in the Agricultural Provision of Ecosystem Services: An Application to a High Cost Production Region," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(2).
    10. repec:eee:agisys:v:154:y:2017:i:c:p:34-44 is not listed on IDEAS
    11. Quillerou, Emmanuelle & Fraser, Rob W., 2009. "Adverse Selection in the Environmental Stewardship Scheme: Does the Higher Level Entry Scheme Design Reduce Adverse Selection?," 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland 51068, Agricultural Economics Society.
    12. repec:eee:ecolec:v:146:y:2018:i:c:p:10-16 is not listed on IDEAS
    13. repec:kap:enreec:v:69:y:2018:i:1:d:10.1007_s10640-016-0072-9 is not listed on IDEAS
    14. Sauer, Johannes & Walsh, John, 2011. "ESS versus NVZ – The Cost-Effectiveness of Command-and-Control versus Agreement Based Policy Instruments," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108963, Agricultural Economics Society.
    15. Mark Brady & Konrad Kellermann & Christoph Sahrbacher & Ladislav Jelinek, 2009. "Impacts of Decoupled Agricultural Support on Farm Structure, Biodiversity and Landscape Mosaic: Some EU Results," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(3), pages 563-585.
    16. Laure Kuhfuss & Julie Subervie, 2015. "Do European PES help reduce herbicide use ? Evidence from a natural experiment in France," Working Papers 15-02, LAMETA, Universitiy of Montpellier, revised Nov 2015.
    17. Glover, Jane, 2011. "Where has all the cream gone: How sustainable is the English dairy supply chain?," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108940, Agricultural Economics Society.

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    Keywords

    Environmental Economics and Policy; Institutional and Behavioral Economics; Land Economics/Use;

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