CONSERVATION PAYMENTS UNDER RISK: A STOCHASTIC DOMINANCE APPROACH

Pablo C. Benitez, Timo Kuosmanen, Roland Olschewski and Gerrit van Kooten

No 18155, Working Papers from University of Victoria, Resource Economics and Policy

Abstract: Conservation payments can be used to preserve forest and agroforest systems in developing countries. To explain landowners' land-use decisions and determine the appropriate conservation payments, it is necessary to focus on risk associated with agricultural price and yield volatility. A theoretical framework is provided for assessing land-use allocation problems under risk and setting risk-efficient conservation payments when returns are not necessary normally distributed. Stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally-preferred land use dominates, even when land uses are not considered to be mutually exclusive. An empirical application to shaded-coffee protection in the biologically important El Chocó region of West Ecuador shows that conservation payments required for preserving shaded-coffee areas are much higher than those calculated under the assumption of risk-neutrality. Further, the extant distribution of land has a strong impact on the required conservation payments.

Keywords: International Development; Land Economics/Use; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 35
Date: 2004
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https://ageconsearch.umn.edu/record/18155/files/wp040005.pdf (application/pdf)

Related works:
Journal Article: Conservation Payments under Risk: A Stochastic Dominance Approach (2006)
Working Paper: Conservation Payments under Risk: A Stochastic Dominance Approach (2005)
Working Paper: Conservation Payments under Risk: A Stochastic Dominance Approach (2005)
Working Paper: Conservation Payments under Risk: A Stochastic Dominance Approach (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uvicwp:18155

DOI: 10.22004/ag.econ.18155

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