Uniform or discriminating payments for environmental production on arable land under asymmetric information

Abstract

Uniform payments are often made to farmers for providing environmental goods (e.g. wetland or semi-natural landscape) on arable land. Assuming hidden information on farmers' costs of converting land for environmental purposes, this paper investigates under what conditions a uniform policy (flat-rate payment) is better than a more sophisticated mechanism that reflects provision costs. A simplified analytical case shows indeterminate results. The ranking of net benefits under the two policies depends on the relationship between the second derivatives of the environmental value and cost functions. A numerical demonstration of arable conversion to wetland in southwestern Sweden shows that net benefits under the two policies can differ significantly

Published in

European Review of Agricultural Economics
2004, volume: 31, number: 1, pages: 61-76
Publisher: OXFORD UNIV PRESS

SLU Authors

• Gren, Ing-Marie

  • Department of Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Agricultural Science
Economics and Business
Environmental Sciences and Nature Conservation

Publication identifier

• DOI: https://doi.org/10.1093/erae/31.1.61

Permanent link to this page (URI)

https://res.slu.se/id/publ/2833