Conservation Payments Under Risk: A Stochastic Dominance Approach

Posted: 22 Feb 2007

See all articles by Pablo C. Benítez

Pablo C. Benítez

Victoria University - Department of Economics

Timo Kuosmanen

Aalto University School of Business

Roland Olschewski

Georg August Universität

G. Cornelis van Kooten

University of Victoria - Economics

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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 Choco 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.

Suggested Citation

Benítez, Pablo C. and Kuosmanen, Timo and Olschewski, Roland and van Kooten, G. Cornelis, Conservation Payments Under Risk: A Stochastic Dominance Approach. American Journal of Agricultural Economics, Vol. 88, No. 1, pp. 1-15, February 2006. Available at SSRN: https://ssrn.com/abstract=964560 or http://dx.doi.org/10.1111/j.1467-8276.2006.00835.x

Pablo C. Benítez (Contact Author)

Victoria University - Department of Economics ( email )

P.O. Box 14428
Melbourne, Victoria 8001
Australia
+1 (250) 472 4416 (Phone)
+1 (250) 721-6214 (Fax)

Timo Kuosmanen

Aalto University School of Business ( email )

P.O. Box 1210
Runeberginkatu 22-24
Helsinki, Finland 00101
Finland

HOME PAGE: http://www.aalto.fi

Roland Olschewski

Georg August Universität ( email )

Platz der Göttinger Sieben 5
Göttingen, DE 37073
Germany
+49 0 551/398714 (Phone)
+49 0 551/393420 (Fax)

HOME PAGE: http://pt-uf.pt-dlr.de/Dateien/Economics_Workshop_rev14_01_05.doc

G. Cornelis Van Kooten

University of Victoria - Economics ( email )

Victoria V8W Y2Y, BC
Canada

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