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

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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," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36850, Agricultural Economics Society.
  • Handle: RePEc:ags:aes008:36850
    DOI: 10.22004/ag.econ.36850
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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, May.
    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, January.
    3. David R. Harvey, 2003. "Agri‐environmental Relationships and Multi‐functionality: Further Considerations," The World Economy, Wiley Blackwell, vol. 26(5), pages 705-725, May.
    4. Campbell, Danny, 2007. "Combining mixed logit models and random effects models to identify the determinants of willingness to pay for rural landscape improvements," 81st Annual Conference, April 2-4, 2007, Reading University, UK 7975, Agricultural Economics Society.
    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. 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.
    7. 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, January.
    8. Rob Fraser, 2002. "Moral Hazard and Risk Management in Agri‐environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 475-487, November.
    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. 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.
    11. R. Fraser, 1993. "Set‐Aside Premiums And The May 1992 Cap Reforms," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(3), pages 410-417, September.
    12. 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.
    13. 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, May.
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