Evaluating Agri-Environmental Schemes – The Marginal Costs of Ecosystem Services

We provide a new approach for assessing the cost of marginal ecosystem changes and the effectiveness of agri-environmental schemes. The approach is based on a theoretical and empirical analysis of the bio-economic production interactions between marketed outputs and non-marketed ecosystem services at the micro level. To frame the economic nature of the problem, we employ a generalized joint production model in combination with cost minimization. The generalized joint production framework allows for the consideration of complementary, substitutive and competitive relationships between agricultural production and non-marketed ecosystem services generation and avoids double counting. From this theoretical model we distinguish three theoretical cases depending on the imposed minimum acceptable level of the non-marketed ecosystem services. We employ farm level panel data for the UK to empirically investigate these cases. More specifically, to represent and evaluate the production structure, we estimate first- and second-order elasticities derived from a flexible transformation function. Results show that the majority of farms produce agricultural output and ecosystem services in a complementary relationship. Generation of multiple ecosystem services on the same farm showed either a substitutive or competitive relationship. A change in the composition of the ecosystem services output would have very different implications for individual farms.

Issue Date:
Feb 10 2011
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
Total Pages:
JEL Codes:
Q18; Q57; Q58.

 Record created 2017-04-01, last modified 2017-04-26

Download fulltext

Rate this document:

Rate this document:
(Not yet reviewed)