The Conservation Reserve Program as a Least-Cost Land Retirement Mechanism

Rodney B.W. Smith

American Journal of Agricultural Economics, 1995, vol. 77, issue 1, 93-105

Abstract: Mechanism design theory is used to characterize the properties of a least-cost CRP. If marginal land rents decrease with acres farmed then a least-cost CRP is a set of nonlinear price schedules. If marginal land rents are independent of acres farmed then an offer system constitutes a least-cost CRP. The least-cost offer system gives a useful estimate of the upper bound of a least-cost CRP. Empirical results suggest that a 34-million-acre CRP should have cost no more than $1 billion per year.

Date: 1995
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