Incentivizing Conservation of de facto Community-Owned Forests

Payments for environmental services are a nature conservation policy in which landowners receive financial compensation conditional on verified environmental service delivery. Contracts for payments for environmental services have been found to be effective in inducing conservation on private lands, but they may give rise to strong free-riding incentives when implemented on lands that are, de facto or de jure, commonly owned. This study implemented a randomized controlled trial in arid Burkina Faso to test the relative effectiveness of two collective payment for environmental services schemes in inducing forest conservation—a linear group payment scheme, in which group payments increase linearly with tree survival rates, and a threshold group payment scheme. The extant theory predicts that the latter incentive mechanism will (weakly) outperform the former. This paper develops a new theory that shows that the reverse may also hold—but only if the relationship between effort and tree survival rates is very uncertain. The findings show that threshold group payments increase intermediate measures of cooperation, but—consistent with Burkina Faso’s harsh conditions rendering tree survival quite stochastic—actual survival rates are higher with the linear group payments. The paper presents field experimental evidence as well as lab experimental results to explore the mechanisms giving rise to these results.