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Do farmers prefer increasing, decreasing, or stable payments in Agri-Environmental Schemes?

Douadia Bougherara, Margaux Lapierre (), Raphaële Préget () and Alexandre Sauquet
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Margaux Lapierre: CEE-M - Centre d'Economie de l'Environnement - Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro
Raphaële Préget: CEE-M - Centre d'Economie de l'Environnement - Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro

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Abstract: Nearly all Agri-Environmental Schemes (AES) offer farmers stable annual payments over the duration of the contract. Yet AES are often intended to be a transition tool, thus decreasing payment sequences would appear particularly attractive for farmers. The standard discounted utility model supports this notion by predicting that individuals will prefer a decreasing sequence of payments if the total sum of outcomes is constant. Nevertheless, the literature shows that numerous mechanisms, such as increasing productivity, anticipatory pleasure and loss aversion can incline farmers to favor an increasing sequence of payments. To understand what drives farmers' preferences for different payment sequences, we propose a review of the mechanisms highlighted by the literature in psychology and economics. We then analyze farmers' preferences for stable, increasing or decreasing payments through a choice experiment (CE) survey of 123 French farmers, about 15% of those contacted. Overall, farmers do not present a clear willingness to depart from the usual stable payments. Moreover, we find a significant aversion to decreasing payments in farmers with a lower discount rate and in those more willing to take risks than the median farmer, contradicting the discounted utility model.

Keywords: Sequences of outcomes; Agri-Environmental Schemes; Discounted utility; Farming practices; Cover crops; Choice experiment (search for similar items in EconPapers)
Date: 2021-01-22
New Economics Papers: this item is included in nep-agr, nep-env, nep-exp and nep-upt
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-03103886
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Published in Ecological Economics, Elsevier, 2021, 83, ⟨10.1016/j.ecolecon.2021.106946⟩

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Related works:
Journal Article: Do farmers prefer increasing, decreasing, or stable payments in Agri-environmental schemes? (2021) Downloads
Working Paper: Do farmers prefer increasing, decreasing, or stable payments in Agri-Environmental Schemes? (2021) Downloads
Working Paper: Do farmers prefer increasing, decreasing, or stable payments in Agri-Environmental Schemes? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03103886

DOI: 10.1016/j.ecolecon.2021.106946

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