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European Review of Agricultural Economics Advance Access originally published online on October 9, 2008
European Review of Agricultural Economics 2008 35(2):167-191; doi:10.1093/erae/jbn022
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© Oxford University Press and Foundation for the European Review of Agricultural Economics 2008; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org

Agri-environmental contracting of Dutch dairy farms: the role of manure policies and the occurrence of lock-in

Jack Peerlings

Wageningen University, The Netherlands

Nico Polman

Agricultural Economics Research Institute (LEI), The Hague, The Netherlands

Corresponding author: Jack Peerlings, Agricultural Economics and Rural Policy Group, Wageningen University, Hollandseweg 1, 6706 KN Wageningen, the Netherlands. E-mail: jack.peerlings{at}wur.nl

Received November 2006; final version received May 2008

The paper examines the possibility of lock-in on the area contracted under an agri-environmental contract in Dutch dairy farming, using a mathematical programming model, and the interaction of these contracts with Dutch national manure policy. Stricter manure policies increase contract participation, since more restrictive N application standards lower the opportunity cost of contracting. If contract payments are halved in a later period, 95 per cent of the contracting farms in the model would like to alter their contracting decision but they do not because of the cost of grassland renewal (switching cost). These farms are locked-in. The model incorporates time, transaction cost and technical and institutional constraints.

Keywords: agri-environmental contracts, farm decisions, switching cost, grassland quality

JEL classification: L14, Q12, Q24, Q28


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