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How do incentive-based environmental policies affect environment protection initiatives of farmers? An experimental economic analysis using the example of species richness

Dörschner, T., Musshoff, O.
Ecological economics 2015 v.114 pp. 90-103
agricultural policy, business enterprises, environmental policy, farmers, managers, opportunity costs, risk, species diversity
To address ongoing biodiversity losses, the use of incentive-based nature protection policies is increasingly recommended. In the present paper, we examine how action and result-oriented agricultural policy measures affect the species protection initiatives of real agricultural managers. To do so, we use a computer-based economic experiment involving a multi-period individual business simulation game. Our results indicate that action-oriented measures do not have any impacts on farmers' initiatives to protect species. In contrast to action-oriented policy measures, result-oriented measures with identical profit effect significantly increase these initiatives. Although risk-averse farmers are less willing to participate in result-oriented measures than non-risk-averse farmers, in general, risk aversion does not influence farmers' species protection initiatives. Furthermore, the species protection initiatives are influenced by the opportunity costs of species protection.