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Optimal Design of Agri-environmental Schemes under Asymmetric Information for Improving Farmland Biodiversity
- Source :
- Journal of Agricultural Economics. 70:153-177
- Publication Year :
- 2018
- Publisher :
- Wiley, 2018.
-
Abstract
- Information asymmetry is one of the main obstacles to the effective design and implementation of agri‐environmental schemes (AES). The literature has generally addressed this issue through the use of principal‐agent models (PAM). We develop a PAM to support optimal design of a new AES for improving farmland biodiversity. We use the results of choice experiments to assess both the costs incurred by the agent for the provision of biodiversity and the resulting social benefits. We also make a number of novel contributions such as the inclusion of a non‐linear non‐compliance detection curve, a sensitivity analysis to identify which parameter estimates have a critical impact on PAM results, and analysis of the efficiency of different sanction scenarios. The results suggest that: (i) the second‐best solutions differ significantly from the optimal solutions attainable with perfect information, with farmers being strongly over‐compensated for the extra costs associated with improved biodiversity; (ii) monitoring levels should be higher; (iii) the sanction system should be tougher. Sensitivity analysis shows the need for accurate estimates of the marginal cost of public funds and the costs and benefits associated with the public goods, which represent the key parameters determining PAM results.
- Subjects :
- 2. Zero hunger
Economics and Econometrics
Cost–benefit analysis
Moral hazard
Computer science
05 social sciences
0211 other engineering and technologies
Perfect information
Principal–agent problem
021107 urban & regional planning
02 engineering and technology
15. Life on land
Public good
Environmental economics
Agricultural and Biological Sciences (miscellaneous)
Information asymmetry
0502 economics and business
Marginal cost of public funds
050202 agricultural economics & policy
Common Agricultural Policy
Subjects
Details
- ISSN :
- 0021857X
- Volume :
- 70
- Database :
- OpenAIRE
- Journal :
- Journal of Agricultural Economics
- Accession number :
- edsair.doi...........9a6039967a4abd732a53cc90190b5032
- Full Text :
- https://doi.org/10.1111/1477-9552.12279