Introduction
Conceptual framework
Context and design
Results
The leakage and livelihood impacts of payments
for environmental services
A targeting experiment in Malawi
B. Kelsey Jack
Elsa Cardona Santos
September 2013
Conclusion
Introduction
Conceptual framework
Context and design
Results
Conclusion
Payments for environmental services
Land use decisions affect the environment
�
When private and social costs diverge: environmental
externalities
Payments for environmental services: Conditional cash transfer to
align private and social costs
�
In practice, takes on many different forms
�
�
Large national programs
Small private programs
Introduction
Conceptual framework
Context and design
Results
PES impacts
Direct impacts:
�
Contracted land use activity (e.g., Pfaff et al. 2008)
Conclusion
Introduction
Conceptual framework
Context and design
Results
Conclusion
PES impacts
Direct impacts:
�
Contracted land use activity (e.g., Pfaff et al. 2008)
Indirect impacts:
�
Environmental outcome(s) associated with the contract
(Pagiola et al. 2007)
�
Environmental outcomes not contracted by the program
(Alix-Garcia et al. 2012)
�
Socioeconomic impacts (Alix-Garcia et al. 2013, Uchida et al.
2009)
Introduction
Conceptual framework
Context and design
Results
Leakage and livelihood impacts in Malawi
Follow up on a randomized experiment in Malawi (Jack 2013)
�
Afforestation contracts with piece rate incentives
�
3 year contracts; 4 payments based on performance
Conclusion
Introduction
Conceptual framework
Context and design
Results
Leakage and livelihood impacts in Malawi
Follow up on a randomized experiment in Malawi (Jack 2013)
�
Afforestation contracts with piece rate incentives
�
3 year contracts; 4 payments based on performance
Answer two questions
1. Do PES contracts have indirect impacts on leakage and
livelihoods?
�
Use random contract assignment (lottery), conditional on
accepting the contract offer
2. Does targeting to low opportunity cost landholders mitigate
those impacts?
�
Use random assignment to incentive compatible auction or
lottery
Conclusion
Introduction
Conceptual framework
Context and design
Results
Conclusion
An agricultural household model
Households are endowed with land and labor
�
Land markets are missing, so unprofitable land remains idle
�
Off-farm labor is the only source of cash income through which a
variable input (e.g. fertilizer) can be purchased
In the absence of PES, households allocate land and labor to
agricultural production until the marginal value of doing so equals
the opportunity cost
Introduction
Conceptual framework
Context and design
Results
Conclusion
The effect of PES on land use
Tree planting requires land and labor, but no variable input
�
Reallocate land toward tree production as long as the
marginal benefit > marginal cost
�
�
�
Idle land: marginal cost is the cost of clearing
Productive land: marginal cost is foregone crop income
Prediction: idle land decreases / clearing increases under PES
Introduction
Conceptual framework
Context and design
Results
Conclusion
The effect of PES on livelihoods
Livelihood impacts depend on the size of the payment relative to
the opportunity cost of the contract
�
p > c makes households wealthier
PES also affects labor allocation
�
Ambiguous predictions
�
�
Depend on marginal value of labor allocated to trees, own
production, leisure and the off-farm wage
Liquidity constraints affect labor allocation if variable input is
a substitute for on-farm labor
Introduction
Conceptual framework
Context and design
Results
Conclusion
The impact of contract allocation
Household willingness to accept the PES contract is determined by
the cost of allocating land and labor toward tree production
�
Those with surplus land and labor likely to have lower WTA
�
Targeting contracts to those with low WTA
�
�
is less likely to distort land and labor allocations
transfers greater surplus to households
→ less leakage, better livelihood impacts
Introduction
Conceptual framework
Context and design
Results
Context
Implemented by The World Agroforestry Centre (ICRAF) with
funding from Ecobank Malawi
�
Objective: Increase tree planting by smallholder farmers
Pilot program: 433 households in 27 villages in central Malawi
�
Surplus land (missing land market)
�
Imperfect labor and capital markets
�
Average landholding size: 5 acres
�
Average income: ~40,000 MWK
Conclusion
Introduction
Conceptual framework
Context and design
Results
The contract
NGO provides:
Farmer provides
Seedlings and training upfront
Monitoring and payments
1/2 acre of land
Land preparation and planting
Care for trees
Payments in four equal installments (3,000 MWK each)
Pay per surviving tree
6 months
1 year
2 years
3 years
Conclusion
Introduction
Conceptual framework
The trees (after 2 years)
Context and design
Results
Conclusion
Introduction
Conceptual framework
Context and design
Results
Conclusion
Design and evaluation
Part 1: Contract impact evaluation
Experimental design: 205 landholders offered a PES contract →
204 accepted → 91 randomly chosen to receive the contract
�
∼ 5 percent attrition between baseline and endline
Analysis
1. Impact of random assignment to contract
�
�
Compare outcome means at the end of the contract
Difference in difference analysis: baseline and endline measures
2. Variable treatment intensity (endogenous)
�
�
Some households kept more trees alive, received higher pay-out
Estimate effects at different pay-out margins
Introduction
Conceptual framework
Context and design
Results
Conclusion
Design and evaluation
Part 2: Targeting effects
Experimental design: 433 landholders assigned to contract or
auction → 228 bid in auction treatment, 85 receive contracts →
auction clearing price offered to lottery treatment
�
∼ 5 percent attrition between baseline and endline
Analysis
�
Impact of allocation treatment on contract impacts
�
�
Difference in difference analysis: outcome means at the end of
the contract, by treatment group
Triple difference analysis: contract vs. no contract, lottery vs.
auction, baseline vs. endline
Introduction
Conceptual framework
Context and design
Outcomes
�
Land use outcomes
�
�
�
�
Socioeconomic outcomes
�
�
�
�
�
Land clearing
Tree planting
Land acquisition
Food expenditures and food shortages
Income from crops
Borrowing
Assets
Household labor outcomes
�
�
Casual labor patterns
Self-reported labor constraint
Results
Conclusion
Introduction
Conceptual framework
Context and design
Results
Conclusion
Part 1: Contract impacts
Land use
Endline cross section:
yiv = αi + δCi + βxi + εiv
Has cleared Total plots No. of plots Total trees Has acquired
land in last 3 cleared in planted with across all
new land
yrs
last 3 yrs
trees
plots
since 2008
Contract
(1)
0.200**
(0.083)
0.112
(2)
0.543**
(0.245)
0.104
(3)
0.526*
(0.264)
0.191
R-squared
Mean, no
0.311
0.745
1.943
contract
Notes: N=205. *p<0.1 **p<0.05 ***p<0.01.
(4)
17.955
(14.017)
0.109
(5)
-0.041
(0.039)
0.178
26.481
0.179
Introduction
Conceptual framework
Context and design
Results
Conclusion
Payment marginal effects: Land use
By endogenous contract performance:
4
.6
Est'd coeff
.2
.4
Has acquired new land since 2008
Est'd coeff
2
3
No. of plots planted with trees
1
0
0
-.2
0
4000 8000 12000
Total payout under contract (MWK)
0
4000 8000 12000
Total payout under contract (MWK)
0
4000
8000 12000
Total payout under contract (MWK)
0
-.2
Est'd coeff
.2 .4 .6
.8
Has cleared land in last 3 yrs
Introduction
Conceptual framework
Context and design
Results
Conclusion
Part 1: Contract impacts
Wealth
Difference in difference (col 3-5):
yivt = αi + δCi + αEndt + γCi × Endt + βxi + εivt
Contract
Per capita
spending on
food
(1)
-32.146
(31.872)
Total income Past borrowing Months of
from crop sales
(0/1)
food shortage
(2)
436.577
(4806.237)
End
Contract!End
R-squared
0.301
Baseline mean, no contract
112.881
N
195
Notes: *p<0.1 **p<0.05 ***p<0.01.
0.309
32000.000
205
(3)
0.039
(0.059)
0.437***
(0.067)
-0.034
(0.096)
0.242
0.510
400
(4)
-0.054
(0.243)
-1.430***
(0.244)
0.243
(0.379)
0.274
3.630
410
Asset index
(5)
-0.031
(0.147)
0.158
(0.139)
0.073
(0.181)
0.312
0.899
410
Introduction
Conceptual framework
Context and design
Results
Conclusion
Payment marginal effects: Wealth
By endogenous contract performance:
Asset index
Est'd coeff
.5 1 1.5
1
-.5
0
2
Est'd coeff
3
4
2
5
Months of food shortage
.4
.6
Est'd coeff
.8 1 1.2 1.4
Past borrowing (0/1)
0
4000 8000 12000
Total payout under contract (MWK)
0
4000 8000 12000
Total payout under contract (MWK)
0
4000 8000 12000
Total payout under contract (MWK)
Introduction
Conceptual framework
Context and design
Results
Part 1: Contract impacts
Household labor
Difference in difference:
Casual labor
Stated labor
Casual labor
is a coping
constraint
income (0/1)
strategy
(0/1)
(1)
(2)
(3)
Contract
0.041
-0.007
-0.009
(0.038)
(0.067)
(0.032)
End
-0.246***
-0.105
-0.035
(0.047)
(0.073)
(0.028)
Contract!End
0.092
0.182**
0.145**
(0.071)
(0.087)
(0.053)
R-squared
0.241
0.137
0.074
Notes: N=410. *p<0.1 **p<0.05 ***p<0.01.
Conclusion
Introduction
Conceptual framework
Context and design
Results
Conclusion
Payment marginal effects: Household labor
By endogenous contract performance:
Est'd coeff
.6
.8
.4
1
1
Casual labor is a coping strategy
Est'd coeff
.6
.8
0
4000 8000 12000
Total payout under contract (MWK)
Casual labor income (0/1)
.4
0
Est'd coeff
.1
.2
.3
.4
Stated labor constraint (0/1)
0
4000 8000 12000
Total payout under contract (MWK)
0
4000
8000 12000
Total payout under contract (MWK)
Introduction
Conceptual framework
Context and design
Results
Leakage through market channels
Contracts awarded to up to 68 percent of households in a village
Test village-level land and labor market spillovers
�
Random variation in the share of households that receive a
contract
�
Control for village, household and individual-level
characteristics
Conclusion
Introduction
Conceptual framework
Context and design
Results
Leakage through market channels
Contracts awarded to up to 68 percent of households in a village
Test village-level land and labor market spillovers
�
Random variation in the share of households that receive a
contract
�
Control for village, household and individual-level
characteristics
Results: No evidence of impacts on labor market participation,
wages or land transfers
Conclusion
Introduction
Conceptual framework
Context and design
Results
Conclusion
Part 2: Allocation effects
Land use
Has cleared
Total plots No. of plots
Has acquired
Total trees
land in last 3 cleared in last planted with
new land since
across all plots
yrs
3 yrs
trees
2008
(1)
(2)
(3)
(4)
(5)
Contract
0.215**
0.582**
0.560**
18.217
-0.052
(0.081)
(0.237)
(0.256)
(14.483)
(0.044)
Auction
0.196**
0.482*
0.162
-2.339
-0.070
(0.078)
(0.236)
(0.279)
(5.586)
(0.044)
Contract!Auction
-0.138
-0.120
-0.024
-0.431
0.064
(0.119)
(0.380)
(0.331)
(15.800)
(0.067)
Mean, no contract
0.393
0.942
1.895
24.802
0.132
Notes: N=433. *p<0.1 **p<0.05 ***p<0.01.
Introduction
Conceptual framework
Context and design
Results
Conclusion
Part 2: Allocation effects
Wealth
Contract
Auction
Contract!Auction
Per capita
spending on
food
(1)
-32.736
(33.912)
59.988
(40.650)
64.609
(59.417)
Total income Past borrowing Months of
from crop sales
(0/1)
food shortage
(2)
1095.708
(4668.174)
8608.354*
(4826.427)
8853.264
(7405.957)
End
Contract!End
Auction!End
Contract!Auction!End
Baseline mean, no contract
112.881
N
408
Notes: *p<0.1 **p<0.05 ***p<0.01.
32000
433
(3)
0.036
(0.058)
0.020
(0.041)
-0.011
(0.078)
0.436***
(0.065)
-0.033
(0.093)
0.057
(0.059)
0.021
(0.110)
0.522
841
(4)
-0.066
(0.234)
-0.313
(0.189)
0.719**
(0.315)
-1.430***
(0.240)
0.243
(0.374)
-0.228
(0.328)
-0.833*
(0.448)
3.300
866
Asset index
(5)
0.007
(0.144)
0.003
(0.086)
0.095
(0.141)
0.158
(0.137)
0.073
(0.178)
0.143
(0.160)
-0.044
(0.208)
0.947
866
Introduction
Conceptual framework
Context and design
Results
Part 2: Allocation effects
Household labor
Casual labor is a
coping strategy
(1)
Contract
0.038
(0.034)
Auction
-0.050
(0.042)
Contract!Auction
0.020
(0.047)
End
-0.246***
(0.046)
Contract!End
0.092
(0.070)
Auction!End
0.064
(0.065)
Contract!Auction!End
-0.181*
(0.099)
R-squared
0.202
Baseline mean, no contract
0.84
Notes: N=866. *p<0.1 **p<0.05 ***p<0.01.
Casual labor
income (0/1)
(2)
-0.011
(0.066)
-0.048
(0.062)
0.116
(0.086)
-0.105
(0.072)
0.182**
(0.086)
0.112
(0.086)
-0.319**
(0.124)
0.132
0.625
Stated labor
constraint (0/1)
(3)
-0.017
(0.033)
0.009
(0.031)
-0.018
(0.044)
-0.035
(0.028)
0.145**
(0.053)
0.084*
(0.041)
-0.065
(0.057)
0.056
0.06
Conclusion
Introduction
Conceptual framework
Context and design
Results
Conclusion
Conclusion
Field experiment shows evidence of indirect effects of a PES
contract
�
Within-farm leakage through land clearing
�
Increase stress on household labor supply
�
No evidence of overall livelihood impacts
More efficient allocation (auction) appears to somewhat mitigate
adverse indirect effects
�
Consistent with Jack (2013) result that auction leads to more
tree survival
Caveats to generalization
�
Results are specific to the contract and setting studied
Introduction
Conceptual framework
Context and design
Results
Thanks
Thanks to the Harvard Sustainability Science Programme, the
International Growth Centre, ICRAF, USAID and the Harvard
Weatherhead Center for International Affairs
Conclusion