Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences

Abstract

Agri-environmental contracts are used to provide incentives for nature management on private land in, e.g. the European Union. The aim of this article is to investigate preference heterogeneity for agri-environmental contracts among farmers in order to discuss potential policy improvements utilising heterogeneity. We used a choice experiment to elicit farmers' stated preferences for afforestation contracts. Four attributes are investigated: purpose of afforestation, option of cancelling the contract, monitoring, and compensation level. All attributes present a potential conflict between farmers' and authorities' interests, which emphasises the importance of knowing how to handle these interests. A random parameter logit model shows that having the option to cancel the contract decreases farmers' required compensation level and monitoring increases it. Furthermore, farmers are willing to accept a lower compensation when the aim is to protect biodiversity and ground water relative to recreation. Latent class models with class probability variables reveal discrete heterogeneity and support a division into four groups with divergent preferences. For example, a group of farmers who already have forest areas does not find the option of cancelling the contract important, whereas another group relying on the farm for income requires higher compensation. The findings indicate potential for efficiency gains from targeting the contracts.

The design of agri-environmental schemes: Farmers’ preferences in southern Spain

“…In fact, the use of this approach to support policy-making has sharply increased in the last five years, especially in regard to AES design. Noteworthy studies that use CE to analyze AES include Ruto and Garrod (2009), who study EU farmers' preferences toward design attributes of AES; Espinosa-Goded et al (2010), who analyze the adoption of AES in specific extensive herbaceous agri-systems in Spain; Christensen et al (2011), who study Danish farmers' willingness to participate in pesticide reduction AES; and Broch and Vedel (2012), who analyze Danish farmers' willingness to participate in afforestation AES. Also, it is worth remarking on the work of 1 For an extensive explanation of the choice experiment theory and practice, see Hensher et al (2005).…”

“…This appears to be counterintuitive and in opposition to the literature on AES uptake. Actually, Broch and Vedel (2012) establish to what extent significant disutility to higher levels of monitoring in AES can generally be expected. This further research could be focused on the reasons behind this different behavior.…”

“…Their work has focused mainly on the barriers to participation in such schemes (Falconer, 2000;Christensen et al, 2011;Broch and Vedel, 2012), and on improving their design (Ruto and Garrod, 2009;Espinosa-Goded et al, 2010). However, more in-depth knowledge is still needed regarding some important issues such as farmers' willingness to accept (WTA) for AES participation in agricultural systems made up of permanent crops, the inclusion of ecological focus areas (EFA) and collective participation in such schemes.…”

“…While AES in these agricultural systems have been previously studied (Calatrava-Leyva et al, 2007;Duarte et al, 2008;Fleskens and de Graaff, 2010;Franco, 2011), to the authors' knowledge none of these works have focused on the ex-ante assessments of farmers' WTA for AES participation, though this is not the case for herbaceous cropping systems (Christensen et al, 2011;Broch and Vedel, 2012). Ex-ante analyses of farmers' WTA for AES participation in permanent crops are opportune now since new AES are being designed for the next programming period, 2014-2020.…”

The Design of Policy Instruments towards Sustainable Livestock Production in China: An Application of the Choice Experiment Method

“…Otieno et al [16] analyzed 343 Kenyan cattle farmers' preference for an AES for disease free zones. Broch and Vedel [17] investigated farmers' preference for afforestation schemes in Denmark. Schulz et al [18] analyzed 128 German farmers' willingness to participate in the Common Agricultural Policy program (CAP).…”