Conservation Payments under Risk: A Stochastic Dominance Approach |
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| Authors: | Pablo C Benítez Timo Kuosmanen Roland Olschewski G Cornelis van Kooten |
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| Institution: | Pablo C. Benítez is post doctoral researcher and G. Cornelis van Kooten is professor, Department of Economics, University of Victoria. Timo Kuosmanen is assistant professor, Environmental Economics and Natural Resources Group, Wageningen University. Roland Olschewski is assistant professor, Georg-August-University, Göttingen. The authors are thankful for the financial support from the German Ministry of Education and Science under the BioTEAM-Program, the Emil Aaltonen Foundation, Finland, and the Canada Research Chairs program. They also thank Henk Folmer and three anonymous journal reviewers for their valuable comments. |
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| Abstract: | Conservation payments can be used to preserve forest and agroforest systems. To explain landowners' land-use decisions and determine appropriate conservation payments, it is necessary to focus on revenue risk. Marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates. An empirical application to shaded coffee protection in the biologically important Chocó region of West Ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk-neutral assumptions. Further, the extant distribution of land has strong impacts on the required payments. |
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| Keywords: | agroforest systems conservation payments land allocation portfolio diversification risk stochastic dominance |
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