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The Pursuit of Efficiency and Its Unintended Consequences: Contract Withdrawals in the Environmental Quality Incentives Program
Author(s) -
Cattaneo Andrea
Publication year - 2003
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1111/1467-9353.00149
Subject(s) - incentive , unintended consequences , environmental quality , quality (philosophy) , business , incentive program , natural resource economics , economics , public economics , environmental economics , microeconomics , political science , law , philosophy , epistemology
This article analyzes why the USDA's Environmental Quality Incentives Program (EQIP) experiences contract withdrawals. Among approved contracts, 17% withdrew one or more conservation practices. After presenting a model of producers' behavior, a logit model is used to examine the withdrawal phenomenon. Withdrawals are linked to producers having an incentive to include low cost‐share payments and practices in the conservation plan that increase the probability of approval, but may not be profitable. These results are discussed in light of the changes to EQIP that have been introduced by the 2002 Farm Act.