Why do Farmers Spend Different Amounts of Transaction Costs in Agri-Environmental Schemes?

Abstract

Agri-environmental schemes provide payments for farmers in return for environmental services. Implementation induces transaction costs (TCs). Borne by farmers (private TCs), their amount may inhibit participation. Research shows substantial variances in private TCs within single schemes, which are largely unexplained to date. Furthermore, no distinction has yet been made in research whether farmers spent TCs due to scheme-prescribed tasks, or voluntarily to achieve "transaction gains.‟ This might be an important factor in farmers‟ perceptions of TCs. The overall aim of this analysis is to explain within-scheme TC variances. TCs are defined functionally as “costs of participation.” The variance in TC spending is assumed to represent a different willingness to participate due to underlying motives. This is tested by ANOVAs and Pearson's correlations with the example of a German AES. Results show that all assumed motives are significant but differ along the implementation process and imply that different functions have TCs. Thus, general public reimbursement of private TCs, as allowed in current EU regulations, might therefore be inappropriate.Agri-environmental Schemes, Transaction Costs, Hesse, Germany, Agricultural Finance, Environmental Economics and Policy,