Use of compliance rewards in agri-environmental schemes

Yuki Yano, David Blandford

Research output: Contribution to journalArticlepeer-review

11 Scopus citations

Abstract

Ensuring that farmers comply with the terms of agri-environmental schemes is an important issue. This paper explores the use of a 'compliance-reward' approach under heterogeneous net compliance costs with respect to cost-share working lands programmes such as the Environmental Quality Incentives Program (EQIP) in the United States. Specifically, we examine the use of a reward under asymmetric information and output price uncertainty. We examine two possible sources of financing under the assumption of budget neutrality: (i) funds obtained by reducing monitoring effort; and (ii) money saved by reducing the number of farmers enrolled. We discuss the advantages and disadvantages of each source of funding and analyse these numerically for both risk-neutral and risk-averse farmers. We also examine the trade-off between increased expenditure on monitoring effort and compliance rewards when additional budgetary resources are available. We show that under certain conditions a compliance reward can increase compliance rates. For risk-averse farmers, however, conditions that ensure a positive outcome become more restrictive.

Original languageEnglish (US)
Pages (from-to)530-545
Number of pages16
JournalJournal of Agricultural Economics
Volume60
Issue number3
DOIs
StatePublished - 2009

All Science Journal Classification (ASJC) codes

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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