How much green for the buck? Estimating additional and windfall effects of the French agro-environmental schemes by DID-matching

Summary

Cost-benefit analysis of agro-environmental schemes (AES) critically hinges on the extent of additional vs windfall effects. We use treatment effects methods to estimate these effects. We make three contributions to the literature. First, we derive the statistical assumptions underlying Difference-in-Difference matching as restrictions on an economic model. These restrictions are consistent with what we know about the practical implementation of the program. Second, we present the first disaggregated estimation of the additionality and windfall effects of a nationwide AES program on environmentally-relevant practices for a nationally representative sample of farmers. Third, we test the robustness of our findings confronting them with a credible alternative identification strategy. Our results suggest that voluntary AES programs that seek to reduce nitrogen use and encourage crop diversification may have large windfall effects. In contrast, more ambitious AESs such as conversion to organic farming, which combine strong requirements with large payments, seem to have achieved their goals.