Green Payments and Dual Policy Goals
We use a mechanism design framework to analyze the optimal design of green payment policies with the dual goals of conservation and income support for small farms. Each farm is characterized by two dimensions of attributes: farms size and conservation efficiency. The policymaker may not be able to use the attributes as an explicit criterion for payments. We characterize optimal policy when conservation efficiency is unobservable to policy-makers, and when farm size is also unobservable. An income support goal is shown to reduce the conservation distortion caused by asymmetric information. The cost of optimal green payment mechanisms is shown to depend crucially on whether large or small farms have greater conservation efficiency.
|Date of creation:||01 Nov 2007|
|Date of revision:|
|Publication status:||Published in Journal of Environmental Economics and Management, November 2007, vol. 54 no. 3, pp. 323-335|
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American Journal of Agricultural Economics,
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- Wu, JunJie & Babcock, Bruce A., 1996. "Contract Design for the Purchase of Environmental Goods from Agriculture," Staff General Research Papers 1050, Iowa State University, Department of Economics.
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