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Incentivizing and Tendering Conservation Contracts: The Trade-off between Participation and Effort Provision

Incentivizing and Tendering Conservation Contracts: The Trade-off between Participation and... ABSTRACT: This paper uses lab experiments to investigate landholder responses to, and the resulting outcome performance of, programs that incentivize and tender conservation contracts. Assuming environmental outcome monitoring is costless, we find that increasing the share of payment linked to uncertain environmental outcomes raises the level of individual stewardship effort but reduces participation, thereby creating a trade-off. This leads to a second trade-off: environmental outcome is maximized at some intermediate level of contract incentivization, but cost-effectiveness at 100%. Tendering such contracts can yield additional benefits in terms of both environmental outcome and cost-effectiveness. However, these benefits decline rapidly with rising incentivization. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Land Economics University of Wisconsin Press

Incentivizing and Tendering Conservation Contracts: The Trade-off between Participation and Effort Provision

Land Economics , Volume 92 (2) – Mar 29, 2016

Incentivizing and Tendering Conservation Contracts: The Trade-off between Participation and Effort Provision


Steven Schilizzi and Uwe Latacz-Lohmann ABSTRACT. This paper uses lab experiments to investigate landholder responses to, and the resulting outcome performance of, programs that incentivize and tender conservation contracts. Assuming environmental outcome monitoring is costless, we find that increasing the share of payment linked to uncertain environmental outcomes raises the level of individual stewardship effort but reduces participation, thereby creating a trade-off. This leads to a second trade-off: environmental outcome is maximized at some intermediate level of contract incentivization, but cost-effectiveness at 100%. Tendering such contracts can yield additional benefits in terms of both environmental outcome and cost-effectiveness. However, these benefits decline rapidly with rising incentivization. (JEL Q18, Q58) I. INTRODUCTION In the last three decades, governments around the globe have developed marketbased policy instruments to procure environmental services from private landholders. Conservation contracting represents the most commonly used policy instrument in this respect. The increased importance of environmental contracting has, to date, hardly been reflected in innovative policy design. It remains the norm in most conservation programs to offer a uniform payment for compliance with a uniform set of management prescriptions. This paper aims to explore two proposals that have been made to enhance the effectiveness of conservation contracting (Ferraro 2011; Burton and Schwarz 2013; Khalumba et al. 2014): linking contract payments to environmental outcomes (rather than conservation activities) and putting the con · · 92 (2): 273­291 ISSN 0023-7639; E-ISSN 1543-8325 2016 by the Board of Regents of the University of Wisconsin System tracts up for tender (rather than paying landholders uniform prices). Whereas the two aspects have mostly been studied in isolation in the literature, this paper investigates the combined effect of...
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Publisher
University of Wisconsin Press
Copyright
Copyright by the Board of Regents of the University of Wisconsin System.
ISSN
1543-8325
Publisher site
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Abstract

ABSTRACT: This paper uses lab experiments to investigate landholder responses to, and the resulting outcome performance of, programs that incentivize and tender conservation contracts. Assuming environmental outcome monitoring is costless, we find that increasing the share of payment linked to uncertain environmental outcomes raises the level of individual stewardship effort but reduces participation, thereby creating a trade-off. This leads to a second trade-off: environmental outcome is maximized at some intermediate level of contract incentivization, but cost-effectiveness at 100%. Tendering such contracts can yield additional benefits in terms of both environmental outcome and cost-effectiveness. However, these benefits decline rapidly with rising incentivization.

Journal

Land EconomicsUniversity of Wisconsin Press

Published: Mar 29, 2016

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