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Agglomeration payment, agglomeration bonus or homogeneous payment?

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  • Wätzold, Frank
  • Drechsler, Martin

Abstract

When designing compensation payments for biodiversity conservation measures setting appropriate incentives so that landowners select spatially connected land parcels for conservation is of key importance for many species. The proposition of an agglomeration bonus, where landowners receive a homogeneous payment and a bonus on top if the spatial allocation of conserved land benefits biodiversity, has been widely discussed. Here, we compare for various ecological and economic parameters the cost-effectiveness and budget efficiency of an agglomeration bonus with a spatially homogeneous payment (where landowners receive the same payment regardless of the spatial allocation of conserved land) and an agglomeration payment (where landowners receive money only if conserved land parcels are spatially connected). Key results include that whether side payments between participants take place plays an important role in the relative performance of the payment options, and that the performance of the agglomeration bonus is either clearly dominated by one of the two other options, but never by both, or very close to the better performing option.

Suggested Citation

  • Wätzold, Frank & Drechsler, Martin, 2014. "Agglomeration payment, agglomeration bonus or homogeneous payment?," Resource and Energy Economics, Elsevier, vol. 37(C), pages 85-101.
    • Handle: RePEc:eee:resene:v:37:y:2014:i:c:p:85-101
    DOI: 10.1016/j.reseneeco.2013.11.011
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    More about this item

    Keywords

    Agri-environment scheme; Biodiversity conservation; Spatial heterogeneity; Payments for environmental services;
    All these keywords.

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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