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Slippage in Conservation Cost Sharing
Author(s) -
Lichtenberg Erik,
Smith-Ramírez Ricardo
Publication year - 2011
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aaq124
Subject(s) - subsidy , business , natural resource economics , offset (computer science) , receipt , adverse selection , environmental economics , economics , finance , accounting , computer science , market economy , programming language
We examine whether subsidies for conservation on working farmland induce farmers to expand cultivation on more vulnerable land, potentially offsetting reductions in environmental spillovers, using a switching regression model with endogenous switching and censored endogenous variables applied to Maryland farm‐level data. We find no indication that cost share awards are targeted toward water quality improvements. Receipt of cost sharing increases conservation practice adoption but not the shares of land allocated to conservation, implying little adverse selection in awards. Cost sharing decreases the share of land allocated to vegetative cover, so that environmental quality improvements from conservation are likely offset to some degree.