On The Empirics of Ecosystem Services Schemes: Technology, Risk and Compliance

The overall aim of this study is to empirically investigate the cost structure of a management agreement typeagri-environmental instrument and to identify factors for cost variation over space and time. We control for theactual level of compliance by using compliance weighted average scheme cost ratios. Beside technological andeconomic performance measures, we also incorporate risk proxies. In addition, we consider unobservedheterogeneity or path dependency with respect to unknown administrative, spatial and farm specific factors.Hence, we try to disentangle random and fixed scheme cost effects by applying a bootstrapped mixed-effectsregression approach using the empirical case of the Environmental Stewardship Scheme in the UK. Regionaland sectoral variation in the scheme uptake and the cost of compliance for the participating farms lead tosignificant cost effects reflecting heterogeneity with respect to management skills and attitudes, productionfocus, location, technologies, economic performance and risk.