Using referenda to improve targeting and decrease costs of environmental conditional cash transfers

Abstract

We measure the willingness to accept of contracts for environmental conditional cash transfers among applicants to Mexico's payments for ecosystem services program. These estimates are significantly lower than the payments offered by the program, suggesting a substantial transfer of surplus to recipients. We simulate adjustments to targeting and to payment levels. We find that targeting solely on deforestation risk can both increase program effectiveness and enrollment of the poor. We also propose a scheme for setting payment levels based on predicted willingness to accept that would be relatively easy to implement given a simple survey referendum question. Simulations show significant cost savings from payments designed this way, with similar potential program effectiveness. (Jennifer Alix-Garcia, Katharine Sims, and Daniel Phaneuf)