Published in Journal of Environmental Economics and Management
Agglomeration bonuses (ABs) are payments conditional on the contiguity of landowners’ conservation areas. It is widely accepted that, by encouraging landowners to cooperate, ABs promote more cost-effective biodiversity conservation than instruments targeting landowners individually. This article challenges this conclusion by studying the impacts of different AB designs, some of which explicitly aim to enhance cooperation while others do not. Specifically, we study whether differentiating the bonuses between internal (within-landholding) and external (between-landholdings) boundaries affects AB cost-effectiveness. Using an economic-ecological model and game theory, our simulations on realistic landscapes show that differentiating the two bonuses (in favor of internal ones) generally increases AB cost-effectiveness. The two bonuses are indeed largely substitutable, with internal outperforming external bonuses. However, when the regulator’s budget is tight, external bonuses can complement internal ones at the margin. The complexity of compensation between plots belonging to different landholdings is a key element in explaining these patterns. Given this complexity, the most cost-effective schemes are characterized by little or no cooperation between landowners. Regarding policy, we conclude that differentiated ABs are cost-effective schemes that should be part of the regulators’ toolbox.
Keywords: Biodiversity; Coalition; Group incentives; Group-level schemes; Cooperative management.
You can also download the working paper
