Efficient Contract Design for Agri-Environment Policy

Authors

  • Andrew Moxey,

  • Ben White,

  • Adam Ozanne


  • Andrew Moxey and Ben White are lecturers in the Department of Agricultural Economics and Food Marketing, The University of Newcastle upon Tyne. Adam Ozanne is a lecturer at the Centre for Agricultural, Food and Resource Economics, School of Economic Studies, University of Manchester. E-mails: a.p.moxey@newcastle.ac.uk; ben.white@newcastle.ac.uk; msrqsao@fsl.ec.man.ac.uk. An earlier version of this paper was presented at a one-day conference on ‘Designing Agri-Environmental Policy Mechanisms: Theory and Practice’, organised by the Agricultural Economics Society in London, December 2, 1997. The authors are grateful to two anonymous referees for helpful comments on a draft of this paper. Any errors rest with the authors.

Abstract

This paper evaluates alternative designs for contracts between a regulator and an agricultural producer to increase the supply of environmental public goods. Contract design, based on the principal-agent model, takes into account an asymmetry of information between the regulator and producer whereby the regulator is unable to observe precisely the producer's compliance costs. An example is included of contracts designed for nitrate abatement.

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