Premium
Use of Compliance Rewards in Agri‐environmental Schemes
Author(s) -
Yano Yuki,
Blandford David
Publication year - 2009
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.2009.00208.x
Subject(s) - compliance (psychology) , incentive , business , outcome (game theory) , quality (philosophy) , environmental economics , public economics , economics , microeconomics , actuarial science , psychology , social psychology , philosophy , epistemology
Ensuring that farmers comply with the terms of agri‐environmental schemes is an important issue. This paper explores the use of a ‘compliance–reward’ approach under heterogeneous net compliance costs with respect to cost‐share working lands programmes such as the Environmental Quality Incentives Program (EQIP) in the United States. Specifically, we examine the use of a reward under asymmetric information and output price uncertainty. We examine two possible sources of financing under the assumption of budget neutrality: (i) funds obtained by reducing monitoring effort; and (ii) money saved by reducing the number of farmers enrolled. We discuss the advantages and disadvantages of each source of funding and analyse these numerically for both risk‐neutral and risk‐averse farmers. We also examine the trade‐off between increased expenditure on monitoring effort and compliance rewards when additional budgetary resources are available. We show that under certain conditions a compliance reward can increase compliance rates. For risk‐averse farmers, however, conditions that ensure a positive outcome become more restrictive.