Contracting for Environmental Outcomes: A Field Experiment in Zambia

Presenter
Paulina Oliva University of California, Santa Barbara

Abstract
Subsidies are often used to increase the adoption of impure public goods, such as environment- or health-improving technologies or behaviors, particularly in developing countries. Where the public good requires sustained effort investments, performance incentives may be more effective than one-time subsidies. We use a field experiment in Zambia to test a model of farmer responses to a threshold incentive contract that rewards tree planting and charges a (potentially subsidized) fee for participation. Farmers have heterogeneous private benefits from surviving trees and incur stochastic effort costs. First, we show that farmers participation decisions respond to the exogenous variation in the input cost and the rewards. Second, we find that there is substantial variation in compliance among participants, and that compliance rates respond to differences in rewards but not in input costs. According to our model, this is consistent with little self-selection based on ex-ante farmer differences as well as the presence of idiosyncratic shocks to effort costs. The findings have implications for the design of technology adoption incentives, where the benefits of adoption depend on sustained effort investments.

Date
Wednesday, September 4, 2013
9:30 - 11:00 a.m. A light breakfast will be provided.

Location
7th Floor Conference Room
1616 P St. NW
Washington, DC 20036 All seminars will be in the 7th Floor Conference Room at RFF, 1616 P Street NW. Attendance is open, but involves pre-registration no later than two days prior to the event. For questions and to register to an event, please contact Khadija Hill at [email protected] (tel. 202-328-5174). Updates to our academic seminars schedule will be posted at www.rff.org/academicseminarseries.