incentive choice and joint liability in...1wunder, 2005 2asquith et al, 2008 2frey & jegen, 2001...
TRANSCRIPT
INCENTIVE CHOICE
AND
JOINT LIABILITY
IN
PES
Matthew Cranford Susana Mourato
Department of Geography & Environment London School of Economics & Political Science
@ ACES, Ecosystem Markets, ESP 2012
CASH OR IN-KIND?
• Cash
– Flexible and divisible1
– Save or invest
– But…property2 , effects of money3,4, myopic spending
• In-kind
– Reciprocity may be cheaper 5
– Market constraints6
– But…conditionality?, what else?
1Wunder, 2005 2Asquith et al, 2008 2Frey & Jegen, 2001 3Vohs et al, 2006 5Heyman & Ariely, 2004 6Groom & Palmer, 2010
JOINT LIABILITY
• Information Asymmetries
– Some solutions for adverse selection in PES1
– Moral hazard not adequately addressed yet
– AES research focused on penalties2, in US/EU
• Groups and public good provision
– Group size and collective action
– Incentivising communities, not individuals
• Can we learn from microfinance?
1Ferraro, 2008 2Yano & Blandford, 2009
APPROACH
SURVEY
Implementation
• 1 researcher, 1 extension worker
• 152 paper-based surveys, 17 communities
• Opportunistic sampling, ~diversified by experience
Sections
• Basic info and household economics
• Environmental attitudes and experience
• Incentive Ranking and Choice experiment
SCENARIO
• Approximately 160 additional trees, across slightly more than 1 Ha
• In “living fences” or other agreed arrangement
• NGO covers up-front costs, you have to manage/protect
• Which type of incentive would you like?
• (Choice experiment)
DECISION PROCESS
X
Ranking C.E.
ANALYSIS
DESCRIPTIVE STATISTICS
Male 54%
Age 51
Education 5.4 years
Land 17.2 Ha 6.6 livestock, 5.3 wooded, 0.5 crops
Property 59% Title, 48% Traditional Rights
Income $3,712 (mean), $2,606(median) 41% <$2 PPP
RANKING INCENTIVES
Livestock Cash Trees Crops
1 38% 36% 22% 5%
2 31% 14% 39% 16%
3 24% 29% 24% 23%
4 7% 21% 16% 57%
AVERAGE CHOSEN
INCENTIVE
Value: COP268K
Materials: 56%
Group Size: 3.3 Families
CHOICE HEURISTICS
Primary Secondary
Group – 35% 21%
Cash – 25% 15%
Value 20% 18%
Cash + 12% 9%
Group + 7% 7%
None 1% 30%
LOGIT, RANDOM FX,
CONTROL
Ua,i Va,i a,i c,i,t/ Ia,i , aCi,t
a = alternative i = individual t = “time” c = in-kind, cows
Systematic Utility
Alt.-specific Error
Panel Effect Control Function
Logit w Random FX (1000 draws)
VALUE (/COP100,000) 1.090 (.102) ***
GROUP -0.484 (.102) ***
GROUP * GROUP 0.034 (.019) (*)
CROPS * Drive Time (/100m) -0.273 (.174)
TREES * Drive Time (/100m) -0.326 (.135) **
CASH * Drive Time (/100m) -0.361 (.087) ***
FX IN-KIND -0.875 (.187) ***
FX LIVESTOCK 0.749 (.354) *
Log likelihood -480
Pseudo R2 0.233
Logit w Random FX (1000 draws)
VALUE (/COP100,000) 1.090 (.102) ***
GROUP -0.484 (.102) ***
GROUP * GROUP 0.034 (.019) (*)
CROPS * Drive Time (/100m) -0.273 (.174)
TREES * Drive Time (/100m) -0.326 (.135) **
CASH * Drive Time (/100m) -0.361 (.087) ***
FX IN-KIND -0.875 (.187) ***
FX LIVESTOCK 0.749 (.354) *
Log likelihood -480
Pseudo R2 0.233
INTERESTING NON-RESULTS
• Community conservation (binary) against
– Cash
– Value
– Group
• Family size on group
• Drive time on group
• Crop income on crop support
• No other individual in-kind panel effects
(TENTATIVE) CONCLUSIONS
• Market constraints influence incentive choice
– Livestock inputs cost more money
– Wood resources cost less effort
• Cash vs. In-kind is a false dichotomy
– Evaluate incentive choice with other criteria
• Positive and negative group effect
– They don’t really like groups to start
– Marginal support + > coordination -
– CBA needed
Asquith, N. M., Vargas, M. T., & Wunder, S. (2008). Selling two environmental services: In-kind payments for bird habitat and watershed protection in Los Negros, Bolivia. Ecological Economics, 65(4), 675-684.
Ferraro, P. J. (2008). Asymmetric information and contract design for payments for environmental services. Ecological Economics, 65(4), 810-821.
Frey, B. S., & Jegen, R. (2001). Motivation Crowding Theory. Journal of Economic Surveys, 15(5), 589-611.
Groom, B., & Palmer, C. (2010). Cost-Effective Provision of Environmental Services: The Role of Relaxing Market Constraints. Environment and Development Economics, 15(02), 219-240.
Heyman, J., & Ariely, D. (2004). Effort for Payment. Psychological Science, 15(11), 787 -793.
Vohs, K. D., Mead, N. L., & Goode, M. R. (2006). The Psychological Consequences of Money. Science, 314(5802), 1154 -1156.
Wunder, S. (2005). Payments for Ecosystem Services: Some Nuts and Bolts (Occasional Paper No. 42). Jakarta: Center for International Forestry Research. Retrieved from http://www.cifor.org/publications/pdf_files/OccPapers/OP-42.pdf
Yano, Y., & Blandford, D. (2009). Use of Compliance Rewards in Agri‐environmental Schemes. Journal of Agricultural Economics, 60(3), 530-545.
Yano, Y., & Blandford, D. (2011). Agri-environmental policy and moral hazard under multiple sources of uncertainty. European Review of Agricultural Economics, 38(1), 141 -155.