Incentive Contracts for Natura 2000 Implementation: A Mixed Model of Adverse Selection and Moral Hazard

Signe Anthon, Serge Garcia and Anne Stenger ()

No 2006-06, Working Papers - Cahiers du LEF from Laboratoire d'Economie Forestiere, AgroParisTech-INRA

Abstract: The implementation of nature conservation policy in the EU is often based on contracts between public authorities and landowners. We model these contracts in the presence of adverse selection and moral hazard when the outcome is uncertain. The results show that agents, who have high probability to reach a higher level of conservation, should be offered a contract where transfers depend on the final outcome with a bonus for a high state. When conservation measures are correlated with forest management, we show that the contractual measures involve distorded tranfers. Finally, we analyze the payment mechanisms used in France and Denmark and show that these mechanisms result in overcompensation and underperformance since they do not take the problem of moral hazard and natural variability into account.

Keywords: Natura 2000; Forest; Contracts; Mixed model; Adverse selection; Moral hazard. (search for similar items in EconPapers)
JEL-codes: D82 Q23 Q57 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2006-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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