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Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning

Author

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  • B. Kelsey Jack
  • Seema Jayachandran
  • Namrata Kala
  • Rohini Pande

Abstract

We test whether payments for ecosystem services (PES) can curb the highly polluting practice of crop residue burning in India. Standard PES contracts pay participants after verification that they met a proenvironment condition (clearing fields without burning). We randomize paying a portion of the money up front and unconditionally to address liquidity constraints and farmer distrust, which may undermine the standard contract's effectiveness. Incorporating partial up-front payment into the contract increases compliance by 10 percentage points, which is corroborated by satellite-based burning measurements. The cost per life saved is $3,600–$5,400. The standard PES contract has no effect on burning.

Suggested Citation

  • B. Kelsey Jack & Seema Jayachandran & Namrata Kala & Rohini Pande, 2025. "Money (Not) to Burn: Payments for Ecosystem Services to Reduce Crop Residue Burning," American Economic Review: Insights, American Economic Association, vol. 7(1), pages 39-55, March.
    • Handle: RePEc:aea:aerins:v:7:y:2025:i:1:p:39-55
    DOI: 10.1257/aeri.20230431
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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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