Potential Cost-Effectiveness of Incentive Payment Programs for the Protection of Non-Industrial Private Forests

Juha Siikamäki and David F. Layton


This study assesses the potential cost-effectiveness of incentive payment programs relative to traditional, top-down regulatory programs for biological conservation. We develop site-level estimates of the opportunity cost and non-monetized biological benefits of protecting biodiversity hotspots in Finnish non-industrial private forests. We then use these estimates to contrast and compare the cost-effectiveness of alternative conservation programs. Our results suggest that incentive payment programs, which tacitly capitalize on landowners’ private knowledge about the opportunity costs of conservation, may be considerably more cost-effective than traditional, top-down regulatory programs. (JEL Q23)

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