Empirical Calibration of a Least-Cost Conservation Reserve Program

provided by Research Papers in Economics

Empirical Calibration of a Least-Cost Conservation
Reserve Program

Glenn Sheriff*

Department of International and Public Affairs
Columbia University

May 18, 2006

Abstract

Mechanism design models typically conclude by characterizing an optimal alloca-
tion schedule based on the principal’s beliefs regarding agent value functions and the
distribution of agent types. This article addresses the question of how a principal can
develop these beliefs given a standard cross-sectional data set in which agents’ input-
output choices are observable, but their underlying heterogeneity is not. I employ the
methodology to evaluate strategies for reducing the cost of a voluntary program that
reduces cultivation on environmentally-sensitive farmland.

Selected Paper prepared for presentation at the American Agricultural Economics
Association Annual Meeting, Long Beach, California, July 23-26, 2006

°c Copyright 2006 by author. All rights reserved. Readers may make verbatim copies of
this document for non-commercial purposes by any means, provided that this copyright notice
appears on all such copies.

*420 W. 118th St., Room 1405, New York, NY 10027, Ph: (212) 854-0027, Fax: (212),864-4847, email:
[email protected]

Robert G. Chambers, Jean-Paul Chavas, Bruce Gardner, W. Bentley MacLeod, Tigran Melkonyan, Valerie
Mueller, Isabelle Perrigne, and Michael Roberts provided valuable comments and suggestions. I also bene-
fited greatly from data-related discussions with V. Eldon Ball and William McBride and other staff at the
USDA Economic Research Service (ERS). This article was screened by ERS to ensure that no confidential
information has been revealed.

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