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The Pursuit of Efficiency and Its Unintended Consequences: Contract Withdrawals in the Environmental Quality Incentives Program

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  • Andrea Cattaneo

Abstract

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.

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  • Andrea Cattaneo, 2003. "The Pursuit of Efficiency and Its Unintended Consequences: Contract Withdrawals in the Environmental Quality Incentives Program," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 25(2), pages 449-469.
    • Handle: RePEc:oup:revage:v:25:y:2003:i:2:p:449-469.
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    File URL: http://hdl.handle.net/10.1111/1467-9353.00149
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    1. Hanna L. Breetz & Karen Fisher-Vanden, 2007. "Does Cost-Share Replicate Water Quality Trading Projects? Implications for a Possible Partnership," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(2), pages 201-215.
    2. Cattaneo, Andrea & Claassen, Roger & Johansson, Robert C. & Weinberg, Marca, 2005. "Flexible Conservation Measures on Working Land: What Challenges Lie Ahead?," Economic Research Report 7248, United States Department of Agriculture, Economic Research Service.
    3. repec:ags:aaea22:335794 is not listed on IDEAS
    4. Pathak, Santosh & Wang, Hua & Adusumilli, Naveen C., 2022. "Contract Non-compliance and Moral Hazard: Evidence from Cost-share Programs in Louisiana, USA," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322324, Agricultural and Applied Economics Association.
    5. Claassen, Roger & Cattaneo, Andrea & Johansson, Robert, 2008. "Cost-effective design of agri-environmental payment programs: U.S. experience in theory and practice," Ecological Economics, Elsevier, vol. 65(4), pages 737-752, May.
    6. Windle, Jill & Rolfe, John & Whitten, Stuart M. & McCosker, Juliana, 2005. "A competitive bidding process with landholder cooperation for landscape linkage," 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia 139301, Australian Agricultural and Resource Economics Society.
    7. Yano, Yuki & Blandford, David, 2008. "Use of Penalties and Rewards in Agri-Environmental Policy," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36873, Agricultural Economics Society.
    8. Paudel, Krishna P. & Gauthier, Wayne M. & Westra, John V. & Hall, Larry M., 2008. "Factors Influencing and Steps Leading to the Adoption of Best Management Practices by Louisiana Dairy Farmers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(1), pages 1-20, April.
    9. Ricardo Smith Ramírez, 2007. "Testing for information asymmetries in voluntary conservation contracts," Working Papers DTE 402, CIDE, División de Economía.
    10. Yuki Yano & David Blandford, 2009. "Use of Compliance Rewards in Agri‐environmental Schemes," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(3), pages 530-545, September.
    11. Canales Medina, Elizabeth & Bergtold, Jason S. & Williams, Jeffery R., 2017. "Modeling the factors affecting farmers’ timing of adoption of in-field conservation cropping practices," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258558, Agricultural and Applied Economics Association.
    12. Cattaneo, Andrea, 2005. "Prescriptive use of Environmental Indices: A "How To" Guide for Conservation Programs," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24764, European Association of Agricultural Economists.
    13. Boyer, Christopher N. & Jensen, Kimberly L. & McLeod, Elizabeth & Larson, James A., 2016. "Upland Cotton Producers’ Willingness to participate in a BMP/STAX Pilot Program," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 234975, Agricultural and Applied Economics Association.
    14. Kim, Youngho & Lichtenberg, Erik & Newburn, David A., 2024. "Payments and penalties in ecosystem services programs," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).
    15. Boyer, Christopher N. & Lambert, Dayton M. & Velandia, Margarita & English, Burton C. & Robert, Roland K. & Larson, James A. & Larkin, Sherry L. & Paudel, Krishna P. & Reeves, Jeanne M., 2016. "Cotton Producer Awareness and Participation in Cost-Sharing Programs for Precision Nutrient-Management Technology," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(1), pages 1-16, January.
    16. Chizmar, Stephanie & Parajuli, Rajan & Frey, Gregory E. & Bardon, Robert E. & Sills, Erin, 2021. "Allocation versus completion: Explaining the distribution of the Forest Development Program fund in North Carolina," Forest Policy and Economics, Elsevier, vol. 132(C).
    17. Ricardo Smith, 2006. "Measuring the Effects of Working-Land Conservation Programs on Adoption of Soil-Erosion Reducing Practices and Permanent Vegetative Cover," Working Papers DTE 369, CIDE, División de Economía.

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