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Direct vs Indirect Payments for Environmental Services: The Role of Relaxing Market Constraints

Groom, Benjamin and Palmer, Charles (2009) 'Direct vs Indirect Payments for Environmental Services: The Role of Relaxing Market Constraints.' Environment and Development Economics . (Forthcoming)

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Abstract

Ferraro and Simpson (2002) argue that when markets are competitive, direct payments for environmental services are more cost effective in achieving environmental goals than indirect payments, say, for capital. However, when eco-entrepreneurs face non-price rationing in input or output markets, as is typical for e.g. credit in developing countries for, we show that interventions which relax constraints can be more cost-e¤ective than direct payments. One corollary of this is that such indirect payments can be preferred to direct payments by interveners (e.g. NGOs) and eco-entrepreneurs alike. Both of these outcomes are more likely when constraints are severe.

Item Type: Articles
SOAS Departments & Centres: Faculty of Law and Social Sciences > Department of Economics
ISSN: 1355-770X
Depositing User: Benjamin Groom
Date Deposited: 14 Sep 2009 09:08
URI: http://eprints.soas.ac.uk/id/eprint/7733

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