Forest conservation policy & motivational crowding:

Experimental evidence from Tanzania

David Kaczan, Brent Swallow and W.L. (Vic) Adamowicz, University of

Alberta, Canada

East Usambara: Multiple Ecosystem Services from a multi-use landscape

East Usambara: Biodiversity Under Threat

Reyes et al. (2007)

• 60% of forest cover lost in East Usambaras

• 26% of remaining forest has cardamom

Payments for Environmental Services and Motivational Crowding

• Financial payments have potential to incent farmers to maintain or adopt land uses consistent with environmental services (water quality, biodiversity conservation and carbon storage)

• Psychology has clarified two distinct motivations for behavior: extrinsic (reward or penalty) or intrinsic (enjoyment, interest or duty) (Frey and Jengen, 2001). (Israeli Day Care example)

• Concerns that financial payments may “crowd out” intrinsic motivations and that crowding out may persist after payments stop (eg Farley and Constanza, 2010)

Research Methods

• Field experiments move experimental economics from lab to field (Cardenas, Jack)

• Field experiment with 250 men and women farmers from two villages in the East Usambaras

• Modified “dictator game” to examine persistent motivational crowding of PES payments

$10 endowment $2 transfer

Experimental design: dictator game

30 Tsh

50 Tsh

20 Tsh

40 Tsh

50 Tsh

20 Tsh

Donated to passive group

Treatment 1, 2: Receive compensation

Treatment 3, 4: Regulation requires certain amount be donated

PES simulations , with private and collective compensation and high and low penalties

Results of Games(Difference in Differences Model – differences in generosity between pre-policy, policy and post policy, between policy treatments.)

Standard Dictator Game: average donation 37% without payment or enforcement

Private PES: average donation of 42%, about equal to reward, suggesting PES substituted for intrinsic motivation (crowding out)

No evidence of persistent crowding out, when payments stopped, donations returned to average of 33%

Collective PES: no effect of PES on donations during the policy period

Regulation prompted an increase in payments greater than economically rational, (55% for high enforcement, 45% for low enforcement) implying a motivation to follow rules beyond expected $ value of fines themselves.

Differences in Crowding Behavior

(Latent Class Model – exploring systematic differences in responses to extrinisic incentives)

Class 1 (62% of sample) exhibited motivational crowding in –after being financially rewarded for donations, this group had post-policy donations 21% higher than pre-policy donations. Class 1 participants had smaller land sizes, were likely to be male and were likely to be born in the village.

Class 2 (38% of sample) exhibited motivational crowding out – after being financially rewarded for donations, this group had post-policy donations 6% lower than pre-policy donations.

a

•No evidence for persistent crowding out for rewards.•Evidence for persistnt crowding in for enforcements.• Fact of enforcement may be more important than its magnitude.•Collective payment unsuccessful.•Strong heterogeneity of preferences: some people crowded out, others crowded in (LCM)

In summary . . .

Acknowledgements: Funding – AAEA, ICRAF, U of AlbertaAdvice -- Heini Vihimalki, Salla Rantala, and Rene BullockField assistance -- F. Njilima, V. Mkongewa, Y. Mwaikio, A. Kajiru, J. Mzalia, Mr. Yambazi;