Transaction costs of agri-environmental policy measures: the extreme bounds analysis applied to permanent graslands
2008
Nilsson, F.O.L., Swedish Univ. of Agricultural Sciences, Uppsala (Sweden). Dept. of Economics
It has been shown in previous studies that transaction costs (TC) of agri-environmental policy measures often are very large both in absolute terms and as a share of payments. As agri-environmental policy measures make up an increasingly large share of agricultural policies, not least within the European Union, it is becoming ever more important to improve the knowledge about the factors determining the level of transaction costs. This paper investigates the TC determinants of one Swedish agri-environmental policy measure. More specifically, it aims to investigate if the level of TC is attributable to economic factors, such as pasture density and distances, or if political factors, such as lobby groups and political majorities at the county level, influence the costs. To evaluate if the results are robust with respect to alterations in model specifications, a version of the extreme bounds analysis is applied. Although initial results indicate that political parties influence the level of transaction costs, the extreme bounds analysis reveals that those results are fragile. It shows that five of the economic variables are robust with respect to model specifications, but none of the political variables is.
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