IDEAS home Printed from https://ideas.repec.org/p/ags/aaea06/21259.html
   My bibliography  Save this paper

Optimal Contract Length for Voluntary Land Conservation Programs

Author

Listed:
  • Chen, Xiaoxuan
  • Ando, Amy Whritenour

Abstract

In many parts of the world, deteriorating environmental conditions have led policy makers to develop policies and programs aimed at promoting conservation practices on lands devoted to agriculture. Such programs have been studied by environmental economists, but little research has been done on the usefulness of strategically varying the conservation contract's length. This paper uses theory and simulation to investigate the optimal contract length of land conservation programs when a policy maker tries to maximize the present discounted value of the stream of environmental benefits from the program. We find that contract length should vary with characteristics of the ecological processes that yield benefits from land retirement. Optimal contracts are longer when the environmental benefits in question things like woodland biodiversity take time to develop. However, it is not typically optimal to have the indefinitely lived contracts favored by some conservation groups, or even to offer contracts as long as the maturation period for the environmental services in question. In general, the optimal contract length depends on the trade off between an ecological effect (increasing the environmental benefits from one farmer) and an enrollment effect (increasing the number of farmers enrolled). Our findings also suggest that non-ecological regional characteristics (such as turnover rate and average farm income) could play an important role in the design of conservation programs.

Suggested Citation

  • Chen, Xiaoxuan & Ando, Amy Whritenour, 2006. "Optimal Contract Length for Voluntary Land Conservation Programs," 2006 Annual meeting, July 23-26, Long Beach, CA 21259, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea06:21259
    DOI: 10.22004/ag.econ.21259
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/21259/files/sp06ch05.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.21259?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Schatzki, Todd, 2003. "Options, uncertainty and sunk costs:: an empirical analysis of land use change," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 86-105, July.
    2. Parks, Peter J. & Schorr, James P., 1997. "Sustaining Open Space Benefits in the Northeast: An Evaluation of the Conservation Reserve Program," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 85-94, January.
    3. Johnson, Phillip N. & Segarra, Eduardo, 1995. "An Evaluation Of Post Conservation Reserve Program Alternatives In The Texas High Plains," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 27(2), pages 1-9, December.
    4. Skaggs, Rhonda K. & Kirksey, R.E. & Harper, Wilmer M., 1994. "Determinants And Implication Of Post-Crp Land Use Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-14, December.
    5. Joseph C. Cooper & C. Tim Osborn, 1998. "The Effect of Rental Rates on the Extension of Conservation Reserve Program Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 184-194.
    6. JunJie Wu, 2000. "Slippage Effects of the Conservation Reserve Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 979-992.
    7. Kalaitzandonakes, N.G. & Monson, M., 1994. "An Analysis of Potential Conservation Effort of CRP Participants in the State of Missouri: A Latent Variable Approach," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(1), pages 200-208, July.
    8. Kalaitzandonakes, Nicholas G. & Monson, Michael J., 1994. "An Analysis Of Potential Conservation Effort Of Crp Participants In The State Of Missouri: A Latent Variable Approach," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 26(01), pages 1-9, July.
    9. Smith, Vincent H. & Goodwin, Barry K., 2003. "An Ex Post Evaluation of the Conservation Reserve, Federal Crop Insurance, and Other Government Programs: Program Participation and Soil Erosion," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(2), pages 1-16, August.
    10. Sumeet Gulati & James Vercammen, 2005. "The Optimal Length of an Agricultural Carbon Contract," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(4), pages 359-373, December.
    11. Capozza, Dennis & Li, Yuming, 1994. "The Intensity and Timing of Investment: The Case of Land," American Economic Review, American Economic Association, vol. 84(4), pages 889-904, September.
    12. Konyar, Kazim & Osborn, C. Tim, 1990. "A National-Level Economic Analysis of Conservation Reserve Program Participation: A Discrete Choice Approach," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 42(02), pages 1-8.
    13. Abebayehu Tegene & Keith Wiebe & Betsey Kuhn, 1999. "Irreversible Investment Under Uncertainty: Conservation Easements and the Option to Develop Agricultural Land," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 203-219, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Madhu Khanna & Amy Ando, 2009. "Science, economics and the design of agricultural conservation programmes in the US," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 52(5), pages 575-592.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Isik, Murat, 2005. "A Theoretical and Empirical Analysis of Conservation Reserve Program Participation under Uncertainty," 2005 Annual meeting, July 24-27, Providence, RI 19264, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Isik, Murat & Yang, Wanhong, 2004. "An Analysis of the Effects of Uncertainty and Irreversibility on Farmer Participation in the Conservation Reserve Program," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(2), pages 1-18, August.
    3. Uchida, Emi & Xu, Jintao & Rozelle, Scott, 2003. ""Grain For Green" In China: Cost-Effectiveness And Sustainability Of A Conservation Set-Aside Program," 2003 Annual meeting, July 27-30, Montreal, Canada 22252, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Claassen, Roger & Hansen, LeRoy T. & Peters, Mark & Breneman, Vincent E. & Weinberg, Marca & Cattaneo, Andrea & Feather, Peter & Gadsby, Dwight M. & Hellerstein, Daniel & Hopkins, Jeffrey W. & Johnsto, 2001. "Agri-Environmental Policy at the Crossroads: Guideposts on a Changing Landscape," Agricultural Economic Reports 33983, United States Department of Agriculture, Economic Research Service.
    5. Lee, Meongsu, 2018. "Impacts of Net Returns Per Acre on Land Use after Conservation Reserve Program Contract Expiration," 2018 Annual Meeting, August 5-7, Washington, D.C. 273877, Agricultural and Applied Economics Association.
    6. Hung-Hao Chang & Richard N. Boisvert, 2009. "Distinguishing between Whole-Farm vs. Partial-Farm Participation in the Conservation Reserve Program," Land Economics, University of Wisconsin Press, vol. 85(1), pages 144-161.
    7. Boisvert, Richard N. & Chang, Hung-Hao, 2005. "Explaining Participation in the Conservation Reserve Program and its Effects on Farm Productivity and Efficiency," 2005 Annual meeting, July 24-27, Providence, RI 19321, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Luca Di Corato, 2018. "Rural land development under hyperbolic discounting: a real option approach," Letters in Spatial and Resource Sciences, Springer, vol. 11(2), pages 167-182, July.
    9. Parks, Peter J. & Schorr, James P., 1997. "Sustaining Open Space Benefits in the Northeast: An Evaluation of the Conservation Reserve Program," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 85-94, January.
    10. Wu, Feng & Guan, Zhengfei & Yu, Fan & Myers, Robert J., 2013. "The spillover effects of biofuel policy on participation in the conservation reserve program," Journal of Economic Dynamics and Control, Elsevier, vol. 37(9), pages 1755-1770.
    11. Lubowski, Ruben N. & Bucholtz, Shawn & Claassen, Roger & Roberts, Michael J. & Cooper, Joseph C. & Gueorguieva, Anna & Johansson, Robert C., 2006. "Environmental Effects Of Agricultural Land-Use Change: The Role Of Economics And Policy," Economic Research Report 33591, United States Department of Agriculture, Economic Research Service.
    12. Towe, Charles A. & Nickerson, Cynthia J. & Bockstael, Nancy E., 2005. "An Empirical Examination of Real Options and the Timing of Land Conversions," 2005 Annual meeting, July 24-27, Providence, RI 19125, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Hongli Feng & Catherine L. Kling & Lyubov A. Kurkalova & Silvia Secchi & Philip W. Gassman, 2005. "The Conservation Reserve Program in the Presence of a Working Land Alternative: Implications for Environmental Quality, Program Participation, and Income Transfer," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1231-1238.
    14. Kim, Youngho & Lichtenberg, Erik & Newburn, David, 2022. "Payments and Penalties in Ecosystem Services Programs," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322103, Agricultural and Applied Economics Association.
    15. Assogba, Noel Perceval & Zhang, Daowei, 2022. "The conservation reserve program and timber prices in the southern United States," Forest Policy and Economics, Elsevier, vol. 140(C).
    16. Chabé-Ferret, Sylvain & Subervie, Julie, 2013. "How much green for the buck? Estimating additional and windfall effects of French agro-environmental schemes by DID-matching," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 12-27.
    17. Jennifer M. Alix-Garcia & Elizabeth N. Shapiro & Katharine R. E. Sims, 2012. "Forest Conservation and Slippage: Evidence from Mexico’s National Payments for Ecosystem Services Program," Land Economics, University of Wisconsin Press, vol. 88(4), pages 613-638.
    18. Winfree, Jason A. & McCluskey, Jill J. & Mittelhammer, Ronald C., 2002. "An Option Value Approach To Valuing Preservation Properties," 2002 Annual Meeting, July 28-31, 2002, Long Beach, California 36619, Western Agricultural Economics Association.
    19. Jacobson, Sarah, 2014. "Temporal spillovers in land conservation," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 366-379.
    20. Jeffrey Stokes, 2012. "The value of the option to preserve farm real estate," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(1), pages 162-175, January.

    More about this item

    Keywords

    Environmental Economics and Policy;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea06:21259. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.