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Grassland Easement Evaluation and Acquisition: an Integrated Framework

Author

Listed:
  • Miao, Ruiqing
  • Hennessy, David
  • Feng, Hongli
Abstract
Efficient grassland easement management requires correct evaluation and cost-effective acquisition of easements. We develop an integrated theoretical framework to study grassland easement evaluation and acquisition. Grassland tracts can be either kept under grass gaining grazing returns or converted to cropland generating cropping returns. Under a two-period framework, grassland owners choose an optimal action from ‘convert now,’ ‘ease now,’ and ‘wait and see’ in period one to maximize total expected returns over the two periods, while taking easement payment from an easement agency as given. The easement agency, however, aims to maximize the increase in expected environmental benefits arising from a budget-constrained easement acquisition program. We find that a mean preserving spread of the difference between cropping returns and grazing returns increases the value from action ‘wait and see’ and the minimum easement payment that landowners are willing to accept (i.e., the easement value). This change will decrease conversion probability in period one. If distribution of cropping returns and grazing returns undergo a shift such that they become larger in the supermodular order sense, then the easement value decreases and the period-one conversion probability increases. Therefore, the easement value and period-one conversion probability may go opposite directions, which indicates that an assumption commonly used in conservation literature (i.e., the larger the conversion probability the higher the easement value) may not hold. Solutions to the easement agency’s problem show that a grassland tract whose owner chooses ‘wait and see’ in period one should not be acquired in that period. An easement acquisition index is developed to rank acquisition priority for different grassland tracts.

Suggested Citation

  • Miao, Ruiqing & Hennessy, David & Feng, Hongli, 2017. "Grassland Easement Evaluation and Acquisition: an Integrated Framework," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252775, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea17:252775
    DOI: 10.22004/ag.econ.252775
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    References listed on IDEAS

    as
    1. Müller, Alfred & Scarsini, Marco, 2000. "Some Remarks on the Supermodular Order," Journal of Multivariate Analysis, Elsevier, vol. 73(1), pages 107-119, April.
    2. Alfred Müller, 2001. "Stochastic Ordering of Multivariate Normal Distributions," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 53(3), pages 567-575, September.
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    Cited by:

    1. Arora, Gaurav, 2017. "Studies on factors affecting the evolution of agroecosystems in the Dakotas," ISU General Staff Papers 201701010800006258, Iowa State University, Department of Economics.
    2. repec:ags:aaea22:335462 is not listed on IDEAS
    3. Arora, Gaurav & Feng, Hongli & Hennessy, David A. & Loesch, Charles R. & Kvas, Susan, 2021. "The impact of production network economies on spatially-contiguous conservation– Theoretical model with evidence from the U.S. Prairie Pothole Region," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).

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    More about this item

    Keywords

    Land Economics/Use;

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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