Evaluating the Efficiency-Participation Tradeoff in Agricultural Conservation Programs: The Effect of Reverse Auctions, Spatial Targeting, and Higher Offered Payments
Gregory Howard, Wendong Zhang, Adriana Valcu-Lisman, Philip W. Gassman
March 2022 [21-WP 622] (Revised)
Howard, G., W. Zhang, A. Valcu-Lisman, and P.W. Gassman. 2022. "Evaluating the Efficiency-Participation Tradeoff in Agricultural Conservation Programs: The Effect of Reverse Auctions, Spatial Targeting, and Higher Offered Payments." Working paper 21-WP 622. Center for Agricultural and Rural Development, Iowa State University.
Using a survey of 430 farmer respondents in the Boone and North Raccoon River watersheds in Iowa, we examine the impacts of three program innovations—reverse auctions, spatially targeted payments, and higher offered payments—on agricultural water conservation program efficiency and participation by farmers. We combine farmer responses to a discrete choice experiment offering voluntary conservation contracts with township-level estimates of per-acre nitrogen reductions from each practice derived from the process-based ecohydrological Soil and Water Assessment Tool (SWAT) model. Using a random-parameters logit model, we show that both cost-reducing and benefit-boosting interventions reduce costs per projected pound of nitrogen removed from the watershed for each practice and thus are more cost-effective than the prevailing current cost-share programs. However, we find that these interventions can reduce participation by 30%–70%. Furthermore, we find cover crop contracts are far more cost-effective than no-till/strip-till split N application contracts.