Slippage in Conservation Cost Sharing

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. Copyright 2010, Oxford University Press.