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Trust and Communication: Mechanisms for Increasing Farmers’ Participation in Water Quality Trading

Trust and communication barriers have contributed significantly to the lethargic performance of many point-nonpoint source water quality trading programs—farmers are often reluctant to participate despite direct financial incentives—yet the literature lacks a comprehensive investigation of how the social context affects trading outcomes. We draw on social embeddedness theory to analyze three mechanisms of communicating with farmers and conduct a case study analysis of 12 water quality trading programs. We find that employing trustworthy third parties or embedded ties may reduce farmers’ reluctance to participate, although the most effective mechanism ultimately depends on local conditions and program objectives. (JEL Q53)