Do Payments for Environmental Services Affect Forest Cover? A Farm-Level Evaluation from Costa Rica

Rodrigo A. Arriagada, Paul J. Ferraro, Erin O. Sills, Subhrendu K. Pattanayak and Silvia Cordero-Sancho


Payments for environmental services (PES) are popular despite little empirical evidence of their effectiveness. We estimate the impact of PES on forest cover in a region known for exemplary implementation of one of the best-known and longest-lived PES programs. Our evaluation design combines sampling that incorporates prematching, data from remote sensing and household surveys, and empirical methods that include partial identification with weak assumptions, difference-in-differences matching estimators, and tests of sensitivity to unobservable heterogeneity. PES in our study site increased participating farm forest cover by about 11% to 17% of the mean area under PES contract over eight years. (JEL Q57, Q58)

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