Schools of economics and commerce: Compliance monitoring and agri-environmental policy
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Date
1977-05
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Abstract
This paper uses an optimal contract approach to examine the issue of compliance monitoring in agri-environmental policy when the farmer is risk neutral and risk averse.
The environmental agency chooses monitoring accuracy and payments for farmer's (non) compliance. With a risk neutral farmer and optimal policy involves maximum allowable penalty for non-compliance. Such an extreme payment scheme contributes to reducing monitoring costs.With a risk-averse farmer the environmental agency has to weigh risk-bearing costs against monitoring costs. Unlike previous studies it is shown that depending on parameter values optimal monitoring accurancy may or may not be higher with a risk-averse farmer than with a risk-neutral farmer
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Keywords
Compliance Monitoring, Agri-Environmental policy