Effects of Exclusion from a Conservation Policy: Negative Behavioral Spillovers from Targeted Incentives

Abstract

A critical issue in the design of incentive mechanisms is the choice of whom to target. For forests, the leading rules are (1) target locations with high ecosystem-service density; (2) target additionality, i.e., locations where conservation would not occur without the incentive; and, (3) at least effectively reward previous private choices to conserve forest. We use a field experiment to examine the changes in contributions to forest conservation when we introduce each of these selection rules. For individuals who are selected, we find that targeting additionality (rule 2) is the only scheme to increase contributions. However, that selection rule intentionally excludes those who contributed most previously, and it is the only one to generate significant “behavioral leakage,” i.e., negative spillovers or a decrease in contributions by those who are excluded (and who face no price or income changes). Our results demonstrate a tradeoff in targeting and a challenge for optimal policy design.

Keywords: incentives, payment for ecosystem services (PES), targeting, spillovers, behavioral economics, field experiment