The Effects of Price Shocks on PES Re-enrollment Rates
Reviewed by Chris Meyer
June 3, 2014
In his paper on payment for ecosystem services (PES) schemes in the United States, George Washington University undergraduate David Kaye wades into the nitty-gritty details of modern agricultural policy. As part of his exploration of a relatively obscure topic, Kaye asks whether exogenous price shocks to agricultural goods would lessen incentives for farmers to reenroll in the Conservation Reserve Program, a USDA initiative that compensates farmers who set aside environmentally sensitive land for preservation. Ultimately, Kaye’s question is one of trade-offs. To what extent can the admirable goal of environmental preservation hold up against the cold economic reality of a lower income the following year?
Ultimately, Kaye finds that locking farmers into long-term contracts under the Conservation Reserve Program will make them more resilient to exogenous price shocks, thereby reducing the overall tendency of participants to withdraw from the program when economic conditions turn south. Although Kay deserves to be applauded for tackling an issue that is hardly the hot topic of undergraduate academia, his paper could do with some methodological adjustments. The absence of meaningful control variables presents a number of pressing questions about confounding factors in the regression, and the language of the paper can often leave readers to cut their way through the technical bramble in order to arrive at the meat of the arguments.
See the full paper here!