Optimal targeting of grassland conservation programs: Evidence from France

Anca Voia ( Toulouse School of Economics)

September 21, 2020, 11:00–12:15


Room Auditorium 5

Environment Economics Seminar


Payments for Ecosystem Services (PES) are voluntary agreements between landowners and the Government in which a yearly payment is given conditional on an environmental service being adequately provided. PES contracts are usually subject to information asymmetries that can limit their cost-effectiveness. In this paper, I use a principal-agent model to provide insights on the optimality of different PES contract designs that take more or less into account these asymmetries.. To this end, I compare empirically the welfare obtained by the regulator under linear-uniform, linear spatially-targeted and nonlinear contracts. For this purpose, I use data on the French Grassland Conservation Program contracts. Specifically, I exploit an exogenous change in the payment structure that happened in 2003 to identify and estimate nonparametrically the farmers' cost function and their distribution of types. I then use this information to select parametric specifications and compute the different welfare functions. I expect to find a significant loss when linear-uniform contracts are used instead of nonlinear ones and that spatially-targeted linear contracts might be a good solution to the optimality - ease of implementation trade-off.