Essays on Behavioral Economics and Policies for Provision of Ecosystem Services

Abstract: Forests provide key ecosystem services such as clean water, timber, habitat for fisheries, carbon sequestration, pollination, and biodiversity. However, many of these services are being lost or degraded at a furious pace, brought about by human activity. For instance, deforestation and forest degradation are measured to account for around 12% of all CO2 emissions, making it the second largest anthropogenic source of carbon dioxide to the atmosphere after fossil fuel combustion (Werf et al. 2009). This has led communities, governments, and international organizations to increase their efforts to protect forests. Among such efforts, the use of monetary incentives to promote or reward private behavior that is associated with environmental objectives is becoming an increasingly popular policy instrument (Pattanayak et al. 2010, Ferraro 2011). For instance, payments for ecosystem services (PES) programs aim to increase the provision of ecosystem services by offering direct compensation to landowners for the opportunity costs of more environmentally friendly land management practices (e.g., low impact agriculture or conservation of natural ecosystems). PES programs have been widely promoted as more cost-effective and institutionally less demanding than traditional conservation policies such as establishment of protected areas. Yet despite this, the few rigorous impact evaluations done so far show that the impact of PES programs has been modest (for a recent review see Pattanayak et al. 2010). This raises concerns that “easy fixes,” like PES, may not solve the planetary problems we are facing. Further, PES may suffer the fate of many interventions that stumble in reaching their objectives because people do not always behave as expected. Cardenas et al. (2000), for instance, experimentally show that introducing an incentive to reduce timber extraction from common forest land led to more forest extraction compared with a case with no incentive. This so-called crowding-out effect has been found in studies, both in psychology and economics, where external incentives sometimes lead to less pro-social behavior1 once the voluntary act is shifted to a market-based relationship (for a review of experimental as well as nonexperimental studies see Bowles 2008). At present, few attempts to understand the behavioral issues of forest conservation polices are undertaken. This five-paper thesis attempts to contribute to the understanding of people’s behavioral responses to forest conservation policies. The first paper examines determinates of the impact of payment for ecosystem services (PES) and the role of behavioral aspects. The second and third papers experimentally examine behavioral responses to incentives for voluntary contributions to forest conservation, where some stakeholders are excluded in favor of others. The fourth paper investigates the relationship between participation in PES programs and type of payment (i.e., cash or in-kind). The fifth and last paper examines the effect of introducing fixed entrance fees on voluntary donations to a protected area. For abstracts of each paper, please see the thesis.