Policy Instrum

ents and Incentives for C

oordinated H

abitat Conservation

Carson R

eelingD

epartment of Econom

icsInstitute for the Environm

ent & SustainabilityW

estern Michigan U

niversity

Leah H. P

alm-Forster

Departm

ent of Applied Economics & Statistics

University of D

elaware

Richard T. M

elstromInstitute of Environm

ental SustainabilityLoyola U

niversity Chicago

Click to edit M

aster title style

Imperiled species (IS

) are costly to landow

ners

•Nearly 50%

of species listed under the US

Endangered S

pecies Act

(ES

A) have >80%

of their habitat on private land

•P

resence of listed animals on land can result in costly land use restrictions

•Æ

incentives to degrade habitat, preempt colonization

Designing

conservation incentives is com

plicated

•M

any species require vast am

ounts of contiguous habitat

•e.g., the lesser prairie chicken in G

reat Plains, greater sage grouse in M

ountain West

•Æ

effective conservation requires coordinated action by m

ultiple landow

ners

Conservation is a coordination gam

e•

Multiple N

ash equilibria:

1.Full conservation: Landow

ners expect neighbors to conserve and hence have incentives to conserve too

2.N

o conservation:Landow

ners expect their neighbors to shirk and hence have incentives to shirk too (coordination failure)

Conservation is a coordination gam

e•

Multiple N

ash equilibria:

1.Full conservation: Landow

ners expect neighbors to conserve and hence have incentives to conserve too

2.N

o conservation:Landow

ners expect their neighbors to shirk and hence have incentives to shirk too (coordination failure)

Conservation is a coordination gam

e•

Multiple N

ash equilibria:

1.Full conservation: Landow

ners expect neighbors to conserve and hence have incentives to conserve too

2.N

o conservation:Landow

ners expect their neighbors to shirk and hence have incentives to shirk too (coordination failure)

Click to edit M

aster title style

Existing conservation policies m

ay or may

not eliminate coordination failure

•Conservation subsidies/cost-sharing: R

educe conservation costs

•Lessen—

but do not eliminate—

probability of coordination failure (Parkhurst et al

2002; Parkhurst and S

hogren2007,2008; D

rechsleret al. 2010)

•Intuition: Increases incentives to conserve, but only if others do too

Click to edit M

aster title style

Existing conservation policies m

ay or may

not eliminate coordination failure

•Conservation subsidies/cost-sharing: R

educe conservation costs

•Lessen—

but do not eliminate—

probability of coordination failure (Parkhurst et al

2002; Parkhurst and S

hogren2007,2008; D

rechsleret al. 2010)

•Intuition: Increases incentives to conserve, but only if others do too

•Voluntary conservation agreements w

ith assurances (VCA

As):

Indemnify landow

ners as long as they maintain conservation practices

•C

an eliminate no-conservation outcom

e (Reeling and H

oran 2015)

•Intuition: C

onserving eliminates affects of others’ choices on m

y outcome;

always som

e benefit to conserving

Objective

We

useeconom

icexperim

entsto

compare

theperform

anceof

(i)land

userestrictions,

(ii)subsidies,and

(iii)V

CA

As

when

multiple

landowners

must

coordinatetheir

conservationefforts

toprotectan

imperiled

species(IS

).

Experim

ental design

•R

ecruited 104 undergraduate students from

U. D

elaware

•G

roups of 4 acted as neighboring farmers

whose land is IS

habitat

•B

aseline earnings = $E 900

•Forfeited if species is listed

•Exchange rate: $E 350/ $1

•Landholdings are hom

ogeneous and com

prise 6 parcels

•S

imultaneously decide w

hether or not to conserve their ow

n parcels

•IS

requires contiguous 8-parcel conserved habitat to avoid listing

Experimental landscape and conservation costs

Experim

ental design

•R

ecruited 104 undergraduate students from

U. D

elaware

•G

roups of 4 acted as neighboring farmers

whose land is IS

habitat

•B

aseline earnings = $E 900

•Forfeited if species is listed

•Exchange rate: $E 350/ $1

•Landholdings are hom

ogeneous and com

prise 6 parcels

•S

imultaneously decide w

hether or not to conserve their ow

n parcels

•IS

requires contiguous 8-parcel conserved habitat to avoid listing

Experimental landscape and conservation costs

Habitat arrangem

ents that prevent listing

Click to edit M

aster title style

Experim

ental procedure•5 parts (total tim

e≈ 90 m

in):

1.Instructions •

Both printed and pre-recorded P

owerP

oint

2.P

ractice round (unpaid)

3.M

ain experiment

•E

ach group participated in 4 treatments, 5 rounds each

•C

ontrol for order effects using Latin square orthogonal design

4.H

olt-Laurylottery to determ

ine risk preferences•

Inconclusive /

5.D

emographic survey

Treatments (w

ithin-subject design)

C1. N

o policy (control)

•Net farm

income does not depend on conservation success.

T2. Land use restrictions

•If the IS islisted, then all farm

ers in the group face land use restrictions and lose $E 900, plus any conservation costs.

T3. Conservation subsidy &

land use restriction

•Farmers earn a cost-share subsidy for each conserved parcel equal to:

¾20%

if the parcel does not border a parcel conserved by a neighbor;¾

30% if the parcel borders 1 parcel conserved by a neighbor; or

¾40%

if the parcel borders 2 parcels conserved by neighbors.

•Listing results in the land use restrictions and losses from T2.

T4. VCA

A & land use restriction

•Listing results in the land use restriction described in T2.

•Each farmer can avoid the penalty by conserving 3 or m

ore parcels, regardless of conservation success.

Nash equilibria

& hypotheses

•Test treatm

ents along four dim

ensions:1.

Mean area reserved

2.S

pecies protection3.

Aggregate costs

4.A

gg. costs | protection

•H

ypotheses:

•P

airwise com

parison of no-policy control, land use restrictions, subsidy, and V

CA

A

•P

rimary hypothesis: m

ean area reserved greater under V

CA

As, but costs will

be greater

Land use restrictions, subsidy

VCA

A

Nash equilibria

& hypotheses

•Test treatm

ents along four dim

ensions:1.

Mean area reserved

2.S

pecies protection3.

Aggregate costs

4.A

gg. costs | protection

•H

ypotheses:

•P

airwise com

parison of no-policy control, land use restrictions, subsidy, and V

CA

A

•P

rimary hypothesis: m

ean area reserved greater under V

CA

As, but costs will

be greater

Land use restrictions, subsidy

VCA

A

Click to edit M

aster title style

No policy (C

1 )

Land use restriction

(T2 )

Subsidy w

/ land use restriction (T

3 )V

CA

A w/ land use

restriction (T4 )

Mean area

reserved0.78

a7.72

b8.05

b9.02

c

[0.53, 1.02][7.53, 7.92]

[7.91, 8.20][8.76, 9.27]

Species

protection0

a0.82

b0.87

b0.76

b

[0 , 0][0.75, 0.88]

[0.81, 0.93][0.69, 0.84]

Aggregate

costs186.2

a2590.4

b2486.2

b2417.7

b

[126.6, 245.7][2376.3, 2804.5]

[2282.8, 2689.5][2290.3, 2545.1]

Agg. C

osts | P

rotection—

2014.6a

2039.8a,b

2088.9b

—[2000.3, 2028.9]

[2013.7, 2066.0][2050.0, 2127.8]

Results

aReported figures are means across all groups and all five rounds. 95 percent confidence intervals are in brackets. Estim

ates m

arked with the sam

e superscript are not significantly different at a 5 percent level.

Click to edit M

aster title style

No policy (C

1 )

Land use restriction

(T2 )

Subsidy w

/ land use restriction (T

3 )V

CA

A w/ land use

restriction (T4 )

Mean area

reserved0.78

a7.72

b8.05

b9.02

c

[0.53, 1.02][7.53, 7.92]

[7.91, 8.20][8.76, 9.27]

Species

protection0

a0.82

b0.87

b0.76

b

[0 , 0][0.75, 0.88]

[0.81, 0.93][0.69, 0.84]

Aggregate

costs186.2

a2590.4

b2486.2

b2417.7

b

[126.6, 245.7][2376.3, 2804.5]

[2282.8, 2689.5][2290.3, 2545.1]

Agg. C

osts | P

rotection—

2014.6a

2039.8a,b

2088.9b

—[2000.3, 2028.9]

[2013.7, 2066.0][2050.0, 2127.8]

Results

aReported figures are means across all groups and all five rounds. 95 percent confidence intervals are in brackets. Estim

ates m

arked with the sam

e superscript are not significantly different at a 5 percent level.

Click to edit M

aster title style

Em

pirical model

•R

andom effects m

odel:

𝑂𝑂𝑂𝑂𝑖𝑖𝑖𝑖 =

𝛼𝛼+�𝑘𝑘=2 4

𝛽𝛽𝑘𝑘 𝑇𝑇𝑘𝑘,𝑖𝑖𝑖𝑖 +�𝑚𝑚=2 4𝛾𝛾𝑚𝑚 𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂

𝑚𝑚,𝑖𝑖𝑖𝑖 +

𝜃𝜃1 𝑟𝑟+𝜃𝜃2 𝑟𝑟 −1+

𝑐𝑐𝑖𝑖 +𝑢𝑢𝑖𝑖𝑖𝑖

where•𝑂𝑂𝑂𝑂

𝑖𝑖𝑖𝑖is the outcom

e (either area conserved, cost, cost | protection)

•𝑇𝑇𝑘𝑘,𝑖𝑖𝑖𝑖is a treatm

ent dumm

y

•𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑚𝑚,𝑖𝑖𝑖𝑖

is an ordering dumm

y

•𝑟𝑟denotes round #

•𝑐𝑐𝑖𝑖 is an individual fixed effect

Click to edit M

aster title style

Model

Explanatory variable1. M

ean area reserved2. Agg.costs

3. Agg.Costs | Protection

Treatment effect

T2 (land use restriction)

β2

base groupbase group

base group

T3 (subsidy w

/ land use restriction)

β3

0.070*

–37.553.39

T4 (VC

AA w/ land use

restriction)β

40.316

***–45.36

19.12***

Order effect

OR

DE

R2

(T2 first)

γ2

–0.001–88.85

*–7.47

OR

DE

R3

(T3 first)

γ3

0.080**

–65.86*

2.56

OR

DE

R4

(T4 first)

γ4

0.105***

23.6322.95

***

rθ

1–0.005

*–3.07

–0.39

r–1

θ2

0.075207.40

***31.41

*

Constant

α1.925

***686.30

***500.41

***

Observations

15601560

1272Subjects

104104

104

Click to edit M

aster title style

Conclusions

•VC

AA

s have attractive theoretical properties

• but incentivizing spatially coordinated conservation isn’t

one of them

•May be better suited for sm

aller, less mobile species

where large, connected habitats aren’t required