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Policy Design and Conservation Compliance on Highly Erodible Lands

We develop a game-theoretic model of heterogeneous producers in order to identify the economic determinants of producer noncompliance with the conservation provisions of the United States Department of Agriculture (USDA) policy on highly erodible lands. We evaluate the policy effectiveness in inducing compliance and adoption of conservation practices. The current policy design creates economic incentives for all noncompliant producers to masquerade as adopters and to claim government payments for which they are not entitled. Both theoretical and empirical results indicate that the increased income transfers to agriculture enacted under the latest Farm Bill will increase producer compliance and conservation activity on highly erodible lands. (JEL Q21)