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Adverse Selection in the Environmental Stewardship Scheme: Does the Higher Level Stewardship Scheme Design Reduce Adverse Selection?

Quillérou, Emmanuelle, Fraser, Robert (2010) Adverse Selection in the Environmental Stewardship Scheme: Does the Higher Level Stewardship Scheme Design Reduce Adverse Selection? Journal of Agricultural Economics, 61 (2). pp. 369-380. ISSN 1477-9552. (doi:10.1111/j.1477-9552.2010.00240.x) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1111/j.1477-9552.2010.00240.x

Abstract

The Environmental Stewardship Scheme provides payments to farmers for the provision of environmental services based on foregone agricultural income. This creates a potential incentive compatibility problem which, combined with information asymmetry about farm land potential, can lead to adverse selection of land into the Scheme and therefore a less cost-effective provision of environmental goods and services. However, the Higher Level Stewardship (HLS) Scheme design includes some features that potentially reduce adverse selection. This paper studies the adverse selection problem of the HLS using a principal-agent framework at the regional level. It is found that, at the regional level, the enrolment of more land from lower payment regions for a given budget constraint has reduced the adverse selection problem through contracting a greater overall area and thus higher overall environmental benefit. In addition, for landscape regions with the same payment rate (i.e. of the same agricultural value), differential weighting of the public demand for environmental goods and services provided by agriculture (measured by weighting an environmental benefit function by the distance to main cities) appears to be reflected in the regulator’s allocation of contracts, thereby also reducing the adverse selection problem.

Item Type: Article
DOI/Identification number: 10.1111/j.1477-9552.2010.00240.x
Additional information: number of additional authors: 1;
Uncontrolled keywords: Adverse selection, agri-environment, contract, environmental stewardship, principal agent, D78, D82, H44, Q18, Q58
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Stewart Brownrigg
Date Deposited: 07 Mar 2014 00:05 UTC
Last Modified: 29 May 2019 12:26 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/40507 (The current URI for this page, for reference purposes)
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