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Research article2004Peer reviewed

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

Gren, IM

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

    UKÄ Subject classification

    Agricultural Science
    Economics and Business
    Environmental Sciences related to Agriculture and Land-use

    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