Journal of Agricultural Economics, Vol. 63, No.

3, 2012, 604–626
doi: 10.1111/j.1477-9552.2012.00358.x

Farmers’ Willingness to Participate in

Payment-for-Environmental-Services
Programmes
Shan Ma, Scott M. Swinton, Frank Lupi and Christina
Jolejole-Foreman1
(Original submitted July 2011, revision received March 2012, accepted
June 2012.)

Abstract
Understanding farmers’ willingness to participate in agricultural payment-for-envi-
ronmental-services (PES) programmes is an essential precondition for designing
effective and efficient programmes. Willingness to participate is typically examined
via stated preference surveys using the standard hurdle model for whether and how
much to participate. Among respondents who decline to participate, such analyses
cannot distinguish between respondents who declined due to the payment level and
those who were not interested at all. This paper applies a double hurdle model to
incorporate a prior condition for whether a respondent is even willing to consider
participating in the PES market. The model uses a unique stated preference survey
permitting separation of the consideration and enrolment decisions of 1,700 farmers
in Michigan, USA. The first hurdle probit model suggests that farmers’ willingness
to consider PES chiefly depends on farm and farmer characteristics, while the second
hurdle tobit model shows that decisions on whether and how much to enrol depend
more on the payment offer and marginal benefit–cost criteria. This study provides
fresh insights on facilitating farmer participation in PES programmes using tiered
strategies that differ in costs of programme payment and administration.

1
Shan Ma is a post-doctoral scholar, Natural Capital Project, Stanford University. E-mail:
mashan@stanford.edu for correspondence. Scott M. Swinton is a Professor and Frank Lupi
is a Professor at the Department of Agricultural, Food and Resource Economics, Michigan
State University, East Lansing, Michigan. Christina Jolejole-Foreman is a PhD candidate at
the Department of Agricultural and Consumer Economics, University of Illinois at Urbana-
Champaign, Urbana, Illinois. The authors gratefully acknowledge support from the National
Science Foundation under the Human and Social Dynamics and Long-term Ecological
Research programmes. Thanks are also due to Michigan AgBioResearch and the Michigan
State University Environmental Science and Policy Program. For valuable discussions, they
thank Phil Robertson, Natalie Rector, Rob Shupp, Soren Anderson, Sara Syswerda, Lenisa
Vangjel and Daniel Mooney. For data, they thank the 1,700 survey respondents as well as
participants in focus groups and pre-tests. This research was conducted while the lead author
was a PhD student at the Department of Agricultural, Food and Resource Economics,
Michigan State University, Michigan, USA.

 2012 The Agricultural Economics Society. Published by Blackwell Publishing,

9600 Garsington Road, Oxford OX4 2DQ, UK, and 350 Main Street, Malden, MA 02148, USA.
 Farmers’ Willingness to Participate in PES Programmes 605

Keywords: Conservation adoption; payments for environmental services; stated

preferences; willingness to accept; willingness to consider.
JEL classifications: Q18, Q51, Q57.

1. Introduction
Agriculture is an ecosystem transformed by humans to generate agricultural produc-
tion. It supplies market goods, such as food, fibre and fuel. In addition, agriculture
also provides non-market environmental services (ES) that depend on farmers’
choices of production inputs and management practices (Wossink and Swinton,
2007). However, because only a small portion of the benefits from non-market ES
accrue to farmers, they have little incentive to produce these services.
Various agri-environmental policies have been implemented to motivate the supply
of environmental services. One prominent example is payment-for-environmental-
services (PES)2, which is attracting increasing attention globally as a policy innova-
tion that translates external ecosystem values into real financial incentives for local
providers (Engel et al., 2008). In the United States, the policy focus has recently
shifted from land retirement programmes, such as the Conservation Reserve Pro-
gramme (CRP), to conservation on working land – land used primarily for crop
production and grazing (Cattaneo et al., 2005). Two prominent examples are the
Environmental Quality Incentives Programme (EQIP) initiated in 1996 and the
Conservation Security Programme (CSP) initiated in 2002.3 The focus of these pro-
grammes has evolved from restricting local negative externalities, such as soil ero-
sion and nitrate run-off, to providing public goods, such as greenhouse gas
mitigation and biodiversity. Similar PES programmes that pay land owners for
effective agricultural land management have also been launched in other developed
countries. The agri-environmental schemes were introduced in 1992 in the European
Union’s Common Agricultural Policy (CAP) to compensate farmers financially for
voluntarily providing environmental services beyond good agricultural practices that
meet minimum legal standards (European Commission Directorate-General for
Agriculture and Rural Development (EC, 2004). There are various agri-environmen-
tal schemes in 26 of 44 European countries (Kleijn and Sutherland, 2003). Examples
include: the Environmental Stewardship Scheme (ESS) and Countryside Steward-
ship Schemes (CSS, replaced by an Environmental Stewardship scheme in 2005) in
the United Kingdom (Dobbs and Pretty, 2008); Rural Environment Protection
Scheme (REPS) in Ireland (Hynes and Garvey, 2009); and the Nitrate Reduction
Programme (NRP) in Greece (Giovanopoulou et al., 2011). There are also user-
financed PES programmes, such as the Vittel (Nestlé Waters) watershed protection
programme in Eastern France (Perrot-Maitre, 2006).
An essential precondition for the success of an agricultural PES programme is
that farmers are willing to participate. If they are, then the next question is how
much. Both decisions involve weighing the potential benefits and costs in PES

2
PES is formally defined as a voluntary transaction where a well-defined environmental
service or a land use likely to secure that service is being ‘bought’ by a service buyer from a
service provider if and only if the service provider secures service provision (Wunder, 2005).
3
The EQIP and CSP programmes are classified as PES programmes by Wunder et al. (2008).

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606 S. Ma et al.

programmes. This study investigates the determinants of farmers’ willingness to par-

ticipate and the degree of participation in hypothetical PES programmes.
Prior to the recent wave of research on PES programmes, many economic studies
examined farmers’ motivations to adopt conservation practices without incentive
payments. Some of these adoption studies focused on single practices, such as
conservation tillage (Rahm and Huffman, 1984; Epplin and Tice, 1986; Sheikh
et al., 2003; Davey and Furtan, 2008), reduced fertiliser and pesticide use (Lasley
et al., 1990; Bosch et al., 1995), and cover crops (Neill and Lee, 2001). Other studies
focused on adopting combinations of multiple practices (Ervin and Ervin, 1982;
Lynne et al., 1988; Nowak, 1992; Wu and Babcock, 1998; Negatu and Parikh,
1999; Soule et al., 2000; Roberts et al., 2006; Wauters et al., 2010). Yet, other adop-
tion studies examined the number of farm-level practices adopted (Lynne and Rola,
1988; Wei et al., 2009), land area allocated for certain practices (Gould et al., 1989)
and expenditure on permanent conservation structures (Norris and Batie, 1987).
This earlier literature provides a solid empirical foundation for PES studies by
attributing farmers’ adoption decisions to various natural, social and economic fac-
tors. However, apart from partial cost-sharing in several cases, these articles involve
no incentive payment. Hence, decisions were chiefly based on the perceived net
benefits of adopting conservation practices.
Farmer participation in early paid conservation programmes was studied by
Purvis et al. (1989), who examined farmers’ willingness to accept payment in a
hypothetical programme to adopt filter strips. They found that farmer decisions
were determined by the size of the payment offer, perceptions of environmental
change, and farmers’ opportunity costs. For observed enrolment choices, Zbinden
and Lee (2005) investigated participation in a PES programme in Costa Rica by
farmers and forest owners. They found that farm size, household farm income, and
familiarity with the programme significantly influenced participation. The 2001 Uni-
ted States Department of Agriculture (USDA) Agricultural Resource Management
Survey reported that the farms most likely to participate in working land PES pro-
grammes were larger, operated by younger farmers, and more reliant on income
from farming (Lambert et al., 2006). Some European studies of farmer participation
in agri-environmental schemes have highlighted the importance of social capital
(Damianos and Giannakopoulos, 2002; Mathijs, 2003; Defrancesco et al., 2008; Ber-
toni et al., 2011), location (Larsén, 2006) and the eligibility of land and crops
(Giovanopoulou et al., 2011).
Although the decision on whether to adopt conservation farming practices with
or without an incentive payment is well examined, previous studies tended to over-
look an implicit prior decision about whether to seriously consider participating in
the proposed programme. This willingness-to-consider decision addresses whether a
proposed programme is sufficiently acceptable to merit closer evaluation of the
financial assistance offered. Some farmers are very unlikely to consider providing
ES through payment programmes, because those programmes do not pass certain
prior screening criteria due to unfavourable physical settings or substantial per-
ceived costs of adoption. These farmers’ decisions are not likely to change with
increased payments that are perceived to be in a politically feasible range. This pay-
ment range represents what farmers are likely to receive in real programmes and
largely depends on their previous experience with government programmes. Other
farmers may be willing to consider the programme, and would choose to participate
given a suitable payment that is high enough to make the operation rewarding.

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 Farmers’ Willingness to Participate in PES Programmes 607

Only a proportion of farmers who consider participating will elect to enrol, as the
rest are unsatisfied with the programme payment offered. Explicitly modelling this
additional choice on whether to consider a PES programme is likely to advance
our understanding of farmers’ participation decisions and provide insights on poten-
tial improvements in current PES programmes. Using the same stated preference
survey data as Jolejole (2009), but with additional information permitting separa-
tion of the consideration and participation decisions, we analyse Michigan corn and
soybean farmers’ decisions in four hypothetical PES programmes, in order to exam-
ine the differences in decisions on whether to consider the programme and the
degree of actual enrolment.

2. Conceptual Model
2.1 Utility function
Following Dupraz et al. (2003), farmers are assumed to maximise utility that is
based upon consumption of market goods (Z) and non-market environmental ser-
vices (E), which are co-produced by farming activities. They face a budget con-
straint that the cost of consumption cannot exceed the sum of profit from farm
production and non-farm income (NFI). Farm profit (p) is earned from selling
agricultural products (Y) at price ry minus variable cost (rxX) and fixed cost (FC).
Output Y is a function of inputs X and FC. The variable cost refers to material
and hired labour associated with the level of production, while fixed cost in this
study refers to predetermined resources, including family labour (L), capital (K),
land area (A), biophysical conditions (B) and information (I) available to farmers.
Environmental services (E), which are produced jointly with market goods (Y)
using variable and fixed inputs, may also affect the magnitude and timing of vari-
able input (X) employment (Zhang et al., 2007). F represents farmer characteristics
that condition the production function and hence condition the effects of PES
offers:

max UðZ; EjFÞ ð1Þ

Z;E

s:t: Z  p þ NFI ð2Þ

p ¼ ry YðX; FCÞ  rx XðEÞ  FCðL; K; A; B; IÞ ð3Þ

E ¼ fðX; FCÞ: ð4Þ

The maximised utility given optimal choices of consumption level (Z*) and envi-
ronmental services (E*) can be represented by the indirect utility function V:

Vðp þ NFIjFÞ ¼ UðZ ; E jFÞ: ð5Þ

2.2 Willingness to accept
Enrolment in a PES programme could change farmers’ maximised utility by requir-
ing a higher level of environmental services or in return for a payment. Farmers’
willingness to participate in a PES programme depends on the magnitude of the
change in utility. This change can be measured monetarily by the willingness to

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608 S. Ma et al.

accept (WTA) payment, which is the minimum payment that the farm household
would require to provide specified environmental services under the programme.
Assuming the supply of environmental services increases from E0 to E1, WTA
can be represented as the change in farm household expenditure (e) as a result of
the change in the level of environmental services produced, holding utility constant
at the initial level U0 [Equation (6)]:

WTA ¼ eðr; E1 ; U0 Þ  eðr; E0 ; U0 Þ: ð6Þ

Based on Equation (5), the influence of the PES programme payment P on the
change of farmer’s utility can be represented by Equation (7). Under common
assumptions that farmers prefer more payment to less but have a decreasing mar-
ginal rate of substitution between payment and other goods, the change of utility is
an increasing and concave function of payment,

DUðPÞ ¼ Vðp1 þ NFI1 þ P; E1 jFÞ  Vðp0 þ NFI0 ; E0 jFÞ: ð7Þ

Farmer WTA is a payment level that would leave utility unchanged equal to zero,
as shown in Equation (8):

DUðWTAÞ ¼ Vðp1 þ NFI1 þ WTA; E1 jFÞ  Vðp0 þ NFI0 ; E0 jFÞ ¼ 0: ð8Þ

2.3 Decision rule

The farmer decision to participate in PES programmes involves two steps. The
first step, whether to even consider a PES programme assesses whether the pro-
gramme might be potentially attractive if a sufficiently high payment were offered.
Although the payment offer might be massive, in practice the ‘sufficiently high
payment’ will be filtered by what farmers believe to be politically feasible. Thus,
farmers would consider a PES programme only if the perceived maximum politi-
cally feasible payment Phigh is greater than their perceived WTA (i.e.
Phigh > WTA). The second step, for farmers willing to consider the programme, is
how much land to enrol. Farmers are assumed to enrol in a specific programme
only if the programme payment offer P* is greater than their WTA (i.e.
P* > WTA). Summarising the two steps, farmers’ decision rule can be represented
as follows:
8   
< Consider DUPhigh >DUðWTAÞ ¼ 0

Enrol DU Phigh >DU
 high  ðP Þ>DUðWTAÞ 
Decision ¼   Not enrol DU P >DUðWTAÞ>DUðP Þ
:
Not consider DU Phigh  DUðWTAÞ ¼ 0:

The levels of utility change in response to the adoption of paid conservation

farming practices are unique to individual decision makers. Each farmer is likely to
perceive a uniquely different change in utility for a given combination of proposed
farming practices. Likewise, each farmer will have a different perception of the max-
imum feasible payment that determines whether they believe that conditions exist
for a higher payment that they might be willing to accept. This study explores farmer’
participation in PES by examining both the consideration and the enrolment deci-
sions separately.

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 Farmers’ Willingness to Participate in PES Programmes 609

3. Data and Questionnaire Design

Data for this study come from a 2008 mail survey of Michigan corn and soybean
farmers that yielded 1,688 responses (56% response rate) (Jolejole, 2009). The survey
used a four contact version of the tailored design method (Dillman, 2007) consisting
of: (i) a pre-notice letter, (ii) a questionnaire and one dollar incentive, (iii) a postcard
reminder, and (iv) a replacement questionnaire. The survey design and questionnaire
development were preceded by a series of farmer focus groups and pre-tests to ensure
validity and clarity of the questions as well as an appropriate range of payment offers
for those cropping practices. Six farmer focus groups were conducted during Febru-
ary and March of 2007, while in-person questionnaire pre-tests were conducted in
January of 2008. A stratified random sample of 3,000 corn and soybean farmers was
provided by the US National Agricultural Statistics Service (NASS) from the 2007
agricultural census mailing list. The farms were stratified into four groups by farm-
land area. Different sampling percentages of farms were drawn from the four strata
with 0 to 100, 101 to 500, 501 to 1,000 and 1,000 or more acres, respectively. Larger
farms were oversampled to capture how most land is managed, and also because of
lower expected response rates among operators of large farms. Sample weights are
incorporated in the empirical analysis to appropriately correct for the stratification.
The survey questionnaire presented each respondent with four hypothetical crop-
ping systems that provided a sequence of cropping practices linked to environmen-
tal service levels. System A, the base system, was a corn-soybean rotation with
chisel tillage, pre-sidedress nitrate test (PSNT) in corn, all agrochemicals broadcast

Table 1
Four cropping systems offered to farmers

Cropping system

Practice Description A B C D

Tillage Chisel plough with cultivation · · · ·

as needed
Soil test Pre-sidedress Nitrate Test · · · ·
(PSNT)
Cover crop None ·
Any type present over winter · · ·
Rotation Corn-Soybean · ·
Corn-Soybean-Wheat · ·
Fertilisation Broadcast fertilisers at full · · ·
university-recommended
rates and split nitrogen
based on PSNT
Band apply over row at ·
university-recommended
rates and split nitrogen based on PSNT (total
application reduced by 1 ⁄ 3)
Pesticide rate Broadcast pesticides at a · · ·
label rate
Band apply pesticides over ·
row at a label amount

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610 S. Ma et al.

in the field according to either Michigan State University recommendations or pesti-

cide label instructions. System B added a winter cover crop, system C added wheat
to the crop rotation, and system D added a requirement to band fertiliser and pesti-
cide application over the crop row and reduce rates by one-third below university
recommendations or label rates (Table 1). Based on agro-ecological research, five
major environmental improvements are expected from the four hypothetical
programmes compared to a conventional corn-soybean system (Table 2). Soil
erosion would be lessened by switching to chisel plough tillage from intensive tillage
tools such as the moldboard plough (Reganold et al., 1987), planting cover crops
over winter (Oades, 1984; Delgado et al., 1999; Joyce et al., 2002), and adding
wheat into the corn-soybean rotation (Peel, 1998). Reduced erosion not only
improves soil fertility and crop productivity (Pimentel and Kounang, 1998), but is
also likely to mitigate the eutrophication problem of lakes by carrying less phosphorus-
rich topsoil into surface water (Correll, 1998; Poudel et al., 2001). Greenhouse gas
emission in the form of carbon dioxide (CO2) and nitrous oxide (N2O) can be
reduced by adding cover crops (Lal et al., 2004; McSwiney et al., 2010), switching
to chisel tillage (Reicosky and Lindstrom, 1993), adopting PSNT (Musser et al.,
1995), and reducing fertiliser application (McSwiney and Robertson, 2005; Hoben
et al., 2011). Farming practices related to nitrogen fertiliser application, such as
cover crops, reducing fertiliser rate and PSNT, would also improve the groundwater

Table 2
Environmental services and outcomes from proposed farming practices in cropping systems

Change from Cropping Environmental Environmental

Practice conventional system systems services outcomes

Tillage Moldboard A, B, C, D Soil erosion fl Soil fertility ›

plough fi Chisel (Phosphorus Surface water
plough surface runoff fl) quality ›
CO2 emission fl Global warming fl
Soil test Adopt pre-sidedress A, B, C, D Nitrogen leaching fl Groundwater
nitrate test (PSNT) N2O emission fl quality ›
Global warming fl
Cover crops Adopt winter B, C, D Soil erosion fl Soil fertility ›
cover crops (Phosphorus Surface water
surface runoff fl) quality ›
Nitrogen leaching fl Groundwater
CO2 and N2O quality ›
emission fl Global warming fl
Rotation Add wheat in C, D Soil erosion fl Soil fertility ›
corn-soybean rotation (Phosphorus Surface water
surface runoff fl) quality ›
Fertiliser Broadcast D Nitrogen leaching fl Groundwater
N&P fertiliser at N2O emission fl quality ›
full rate fi Band Global warming fl
application at 2 ⁄ 3 rate
Pesticide Broadcast D Pesticide into air fl Health risk fl
pesticides at full Air pollutionfl
rate fi Band
application at 2 ⁄ 3 rate

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 Farmers’ Willingness to Participate in PES Programmes 611

quality due to less nitrogen leaching (Borin et al., 1997; Poudel et al., 2001).
Reduced pesticide rates would also mitigate on-site and off-site air pollution and
possible human health risks (Glotfelty et al., 1987; van den Berg et al., 1999).
A main effect orthogonal design framework was constructed for the 16 question-
naire versions. The versions varied by payment levels offered (4), payment provider
(federal government or non-governmental organisation) and sequence of cropping
practices (increasing or decreasing in complexity and expected environmental bene-
fits). For each cropping system, respondents were first offered a specific payment for
adopting the given system for a period of 5 years, and they were asked how many
acres they would enrol in such a programme. Respondents who chose not to enrol
any land were asked whether they would consider enroling in that system if the pay-
ment were higher. Thus, the ‘consider’ group and ‘not consider’ group are distin-
guished based upon this question and assuming that all farmers who chose to enrol
would also consider the programme with a higher payment. Within the ‘consider’
group, ‘enrol’ sub-group and ‘consider but not enrol’ sub-group are further identified
by the first acreage enrolment question. Note that, unlike the conceptual model, the
willingness-to-enrol question was presented ahead of the willingness-to-consider ques-
tion. This approach mimics existing agri-environmental programmes that offer a real
payment, avoiding an abstract question about hypothetical willingness to consider the
programme without a payment offer. The subsequent question on considering enrol-
ment with a higher payment follows naturally from a response declining to enrol.
Figure 1 shows the number of farms falling into each response group in our dataset.

1,400

1,200 Not consider

1,000
No. of farms

Consider but not

800
enrol
600
Enrol
400

200

0
System A System B System C System D

Figure 1. Number of farms that fell into the three participation categories for each of the
four cropping systems (N = 1,688 Michigan corn and soybean farms, year = 2008)

Besides farmer choices associated with each cropping system, other survey informa-
tion includes current crop management practices, farmers’ perception of benefits from
changed practices, attitudes on the importance of enhanced environmental services, past
experience with beneficial farming practices, participation in our four hypothetical crop-
ping systems containing those practices, and demographic background. Detailed infor-
mation about data collection and questionnaire design can be found in Jolejole (2009).

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4. Empirical Model and Variables

4.1. Choice of models
To model farmer participation in conservation programmes, several functional
forms have been used in the literature. The basic participation or adoption decision
is a dichotomous choice, so binary response models, such as probit (Rahm and
Huffman, 1984; Bosch et al., 1995; Sidibe, 2005; Davey and Furtan, 2008) and logit
(Lee and Stewart, 1983; Soule et al., 2000; Pautsch et al., 2001; Sheikh et al., 2003;
Upadhyay et al., 2003) are widely applied. Ordered probit (Negatu and Parikh,
1999) and multinomial logit (Wu and Babcock, 1998; Zbinden and Lee, 2005) have
been used to model choices among more than two alternatives.
When the choice concerns the level of participation, typically the land acreage
promised for certain practices, a continuous variable needs to be selected in
addition to the binary participation choice, though the continuous variable is trun-
cated at zero. In certain circumstances, a corner solution occurs when some acreage
enrolment responses pile up at zero while others take strictly positive values. The
simplest way to model a corner solution is the tobit model (Tobin, 1958), which
assumes all zeros are generated due to the same mechanisms underlying the positive
values. The tobit model has been used for adoption of farming practices in a few
studies (Norris and Batie, 1987; Lynne et al., 1988; Mazvimavi and Twomlow,
2009; Wei et al., 2009).
One extension to the tobit model is a hurdle model (Cragg, 1971), in which differ-
ent mechanisms are allowed for the decisions on whether and how much to partici-
pate. It has been used for examining the willingness-to-participate in agricultural
conservation programmes (Uri, 1997) and other environmental programmes (Good-
win et al., 1993; Shrestha et al., 2007; del Saz-Salazar and Rausell-Koster, 2008). A
further extension is the double hurdle model (Blundell and Meghir, 1987). In this
case, two types of zero responses are implied, reflecting either non-participation or
insufficient remuneration (payment level), where only the latter is likely to be deter-
mined by the same mechanisms as the positive enrolment response. Various types of
double hurdle model have been adopted in studies of food consumption, such as
meat (Burton et al., 1996; Su and Yen, 1996), cheese (Yen and Jones, 1997), alcohol
(Yen and Jensen, 1996) and prepared meals (Jensen and Yen, 1996; Newman et al.,
2003).
A standard double hurdle specification seems to suit our dataset. Probit regres-
sion is used in the first stage to distinguish between potential participants and those
who would not consider the programme. A tobit specification is applied in the sec-
ond stage to investigate the decision on how much to enrol conditioned on willingness-
to-consider. The complete econometric specification of the double hurdle model is
shown in the next section.

4.2. Econometric model

Participation in an agricultural PES programme may involve two corner solutions
before the real positive acreage enrolment can be observed. The farmland area that
respondents choose to enrol in the programme is represented by y, which is a com-
pound function of the binary consideration decision c, and the continuous choice of
acreage enrolment, a, which can be zero or positive:

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 Farmers’ Willingness to Participate in PES Programmes 613

y ¼ c  a: ð9Þ
Probit estimation is used for the binary choices of consideration. The latent vari-
able c* indicates the farmer’s utility gain per unit land area by considering enroling
in the programme with a suitable payment:
c ¼ x1 c þ e e  Nð0; re Þ ð10Þ

1 c >0
c¼ ð11Þ
0 c  0:
The land area (acreage) enrolment variable a is indicated by a latent variable a*
and cornered at zero [Equation (12)]. The independent variable vectors x1 and x2,
weighted by parameter vectors c and b influence the farmer’s utility [Equation (10)]
and area chosen for enrolment [Equation (13)]. The random terms e and u are
assumed to be independent with zero means and constant variances r2. The positive
enroled acreage can be observed only if the farmer considers the programme and
chooses to participate given a specific payment [Equation (14)]:

a ¼ max½a ; 0 ð12Þ
 
a ¼ x2 b þ u>0 u  N 0; r2u ð13Þ

a if c ¼ 1; a>0
y¼ ð14Þ
0 otherwise:

The unconditional density of y is derived by taking into account two decisions:

fðyjx1 ; x2 Þ ¼ ½1  Uðx2 b=ru ÞUðx1 c=re Þ1½y¼0

ð15Þ
þ f½Uðx1 c=re Þu½ððy  xi bÞ=ru Þ=ru g1½y>0

The associated log-likelihood function used for Maximum Likelihood estimation is:
li ðc; bÞ ¼ 1½yi ¼ 0 log½1  Uðx2i b=ru ÞUðx1i c=re Þ
ð16Þ
þ 1½yi >0flog½Uðx1i c=re Þþ logfu½ððyi  x2i bÞ=ru Þ=ru gg:
Estimates of the two models are adjusted for stratum-specific sampling probability.

4.3. Variables
There is one probit regression for consideration and one tobit regression for acreage
enrolment in the double hurdle model. The dependent variable for the consideration
model is farmers’ dichotomous choice of considering enrolment in the programme,
which is contingent on the belief that the payment is politically feasible. The depen-
dent variable for the acreage enrolment model is the number of acres that farmers
would enrol in the programme, including both zero and positive acreages. See
Table 3 for descriptive statistics on the dependent variables.
The same set of independent variables is employed in both probit and tobit regres-
sions for comparison. Six broad categories of explanatory variables linked to the

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Table 3
Summary statistics for dependent variables

Dependent variable System Unit Obs. Mean SD Min Max

Probit model: consideration

Consider vs. Not consider A Dummy 1,146 0.57 0.49 0 1
Consider vs. Not consider B Dummy 1,124 0.59 0.49 0 1
Consider vs. Not consider C Dummy 1,112 0.64 0.48 0 1
Consider vs. Not consider D Dummy 1,149 0.61 0.49 0 1
Tobit model: acreage enrolment
Acreage enrolment A Acres 658 331 840 0 15,000
Acreage enrolment B Acres 666 278 608 0 10,000
Acreage enrolment C Acres 717 361 608 0 7,000
Acreage enrolment D Acres 701 416 690 0 7,000

conceptual model are defined as follows (Table 4): First, the design attributes cate-
gory, corresponding to the attributes of the programmes that were part of our experi-
mental design. These include the per-acre programme payment, P*, for each
cropping system, the sequence in which the four cropping systems were presented to
respondents, and whether the payment was provided by government. With the adop-
tion of different cropping practices, farmers are assumed to incur additional direct
costs (e.g. for labour and ⁄ or material inputs) and opportunity costs (e.g. for growing
a less profitable crop). Following exploratory results from farmer focus group inter-
views in 2007, the payment offer ranges for the four cropping systems were: A: $4 to
$17; B: $10 to $36; C: $15 to $55; and D: $20 to $75. The payment offer is hypothes-
ised to have more effect on acreage enrolment than on the willing-to-consider deci-
sion, for which a larger but politically feasible payment is implied. The descending
sequence dummy variable denotes respondents who received questionnaires with the
sequence of cropping systems decreasing in stringency and associated payment offers.
Second, the perception and attitudes category of variables corresponds to environ-
mental services E. These variables depict farmer perceptions of ES benefits from
certain cropping systems, and their attitudes on whether nature provides services
that could benefit their crop production. These variables are measured on a 5-point
Likert scale (1 for strongly disagree, 2 for disagree, 3 for neutral, 4 for agree, and 5
for strongly agree).
The third category describes the biophysical attributes of farms corresponding to
biophysical conditions B, which includes farm size and soil types. Larger farms are
expected to be more likely to enrol in a PES programme because they have a higher
capacity to invest and to withstand risks from changed practices (Knowler and Brad-
shaw, 2007; Prokopy et al., 2008). Soil type refers to dummy variables for soil texture.
Clay soils may be more fertile but less well-drained than the loam soil baseline,
whereas sandy soils are less fertile but better drained. Soil attributes exhibited mixed
effects in different studies depending on the specific practices. In this study, enrolment
in the reduced chemical system is expected to be positively related to clay soil, which
tends to be more fertile than sandy soil and silty soil. Cropping systems with soil
conservation practices, such as cover crops and corn-soybean-wheat rotation are
expected to be positively related to sandy soil, which is more erodible.
The fourth category measures farm management attributes. Different management
practices would require different combinations of variable inputs X, labour L and

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 Farmers’ Willingness to Participate in PES Programmes 615

Table 4
Summary statistics of independent variables

Independent variables Units Obs. Mean SD Min Max

Questionnaire version
Government Dummy 1,796 0.497 0.500 0 1
Descending sequence Dummy 1,796 0.503 0.500 0 1
Payment offer (System A) Dollars 1,796 10.2 4.78 4 17
Payment offer (System B) Dollars 1,796 23.2 9.05 10 36
Payment offer (System C) Dollars 1,796 36.7 12.5 15 55
Payment offer (System D) Dollars 1,796 51.0 16.7 20 75
Perception and attitudes
Perceived env. performance (A) Likert 1–5 1,245 2.97 0.808 1 5
Perceived env. performance (B) Likert 1–5 1,189 3.24 0.776 1 5
Perceived env. performance (C) Likert 1–5 1,200 3.37 0.784 1 5
Perceived env. performance (D) Likert 1–5 1,245 3.46 0.794 1 5
General attitudes of ES Likert 1–5 1,475 3.12 1.11 1 5
Farm biophysical attributes
Total land Acres 1,521 1,151 1,408 2 21,500
Sandy soil Dummy 1,796 0.274 0.446 0 1
Silty soil Dummy 1,796 0.028 0.165 0 1
Clay soil Dummy 1,796 0.434 0.496 0 1
Farm management attributes
Moldboard tillage land percent Ratio 1,486 0.067 0.178 0 1
No till tillage land percent Ratio 1,486 0.185 0.244 0 1
Conservation land percent Ratio 1,486 0.342 0.286 0 1
Wheat land percent Ratio 1,486 0.083 0.103 0 0.714
Cover crops land percent Ratio 1,489 0.047 0.149 0 1
PSNT land percent Ratio 1,489 0.050 0.170 0 1
Organic land percent Ratio 1,477 0.002 0.025 0 0.63
Irrigation land percent Ratio 1,796 0.048 0.165 0 1
Reduced fertiliser use Dummy 1,444 0.218 0.413 0 1
Reduced pesticide use Dummy 1,442 0.209 0.407 0 1
MAEAP Dummy 1,371 0.142 0.349 0 1
EQIP Dummy 1,379 0.298 0.458 0 1
CRP Dummy 1,421 0.349 0.477 0 1
CSP Dummy 1,324 0.120 0.325 0 1
Operator attributes
Age Years 1,501 54.8 11.6 21 94
Education Years 1,488 13.4 2.56 6 20
Main income source from farm Dummy 1,488 0.718 0.450 0 1
Market prices
Wheat ⁄ corn price Ratio 1,059 1.682 0.323 0.15 3.33
Wheat ⁄ soybean price Ratio 1,049 0.732 0.358 0.2 7

capital K. Farmer’s current practices of tillage, wheat acreage, cover crops, organic
crops, fertiliser and pesticides4 are expected to affect enrolment positively if they are
similar to the new cropping system. The influence of irrigation on the adoption of

4
Reduced fertiliser and pesticides are dummy variables with one indicating currently band
apply fertiliser ⁄ pesticide to 2 ⁄ 3 of full field rate.

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616 S. Ma et al.

new practices is ambiguous. Intensive irrigated agriculture tends to facilitate adop-

tion of nitrate testing, but deters reduced tillage and crop rotation (Bosch et al.,
1995; Wu and Babcock, 1998). The results depend on the payoff of irrigation asso-
ciated with different practices.
The fifth category of operator attributes includes age, level of formal education of
farm operators, and whether farm income is the major source of household income.
This category may influence farmers’ information I and choice of management
practice. Farmers who are younger and have higher education are expected to be
more likely to participate. Farms deriving most of their income from agricultural
production are hypothesised to be more willing to enrol in programmes requiring
more intensive management.
The last category includes market prices, which are represented by the output
price vector ry in the conceptual model. Prices are represented by ratios of farmers’
expected prices for wheat compared to corn and soybean. Both price ratio variables
are expected to be positively related to adoption of cropping systems that require
wheat, namely systems C and D.

5. Results
Although the willingness-to-consider and acreage enrolment decisions are modelled
using the same set of variables, results of the double hurdle model suggest that the
first-round willingness-to-consider decision depends chiefly on non-price farm and
farmer characteristics. By contrast, the second-round enrolment decision depends
more on payment-driven benefit–cost criteria.
Both consideration and enrolment decisions are influenced by two common fac-
tors. First, the perceived environmental performance of each system significantly
contributes to both enrolment and willingness to consider each of the four cropping
systems. This finding is consistent with previous studies (Gould et al., 1989; Purvis
et al., 1989; Traore et al., 1998; Sidibe, 2005; D’Emden et al., 2008; Wei et al.,
2009), as the perceived ES benefits both individual farmers and the society. A new
finding from this study is that the marginal effects of perceived environmental per-
formance increase from System A to D for the willingness-to-consider decision, but
they decrease for the enrolment decision. This suggests that farmers would be more
willing to consider systems with higher requirements and larger environmental bene-
fits given the same unit increase in environmental performance, but would be less
willing to enrol more land in those systems, perhaps due to higher costs associated
with realising these benefits. The second common factor for two decisions is the
sequence of presenting cropping systems to farmers. Farmers who were presented
with the higher-complexity and higher-payment cropping system (System D) first
were less likely to either consider or enrol in the other three cropping systems. This
unexpected survey design effect may reflect farmers being less willing to make small
improvements in their cropping systems or maintain low environmental perfor-
mance practices if a larger return with substantial improvement is an option.

5.1 Willingness-to-consider decision

The double hurdle model complements previous PES studies by revealing several
differences between the attributes that motivate the consideration decision and those
that motivate the subsequent enrolment choice. These differences cannot be detected

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 Farmers’ Willingness to Participate in PES Programmes 617

Table 5
Marginal effects from probit estimation of farmers’ consideration, weighted by stratum, by
cropping systems, 1,688 Michigan corn or soybean farmers, 2008

System A System B System C System D

Coef. P>z Coef. P>z Coef. P>z Coef. P>z

Descending sequence )0.18*** 0.00 )0.13* 0.05 )0.042 0.45 0.072 0.19
Payment offer 0.016** 0.02 )0.0023 0.43 0.00060 0.76 )0.0012 0.47
Perceived env. perf. 0.082** 0.04 0.13*** 0.00 0.18*** 0.00 0.19*** 0.00
General ES attitudes 0.069** 0.01 0.046* 0.10 0.051** 0.04 0.038* 0.08
No till tillage 0.37** 0.04 0.38** 0.03 0.41** 0.02 0.25 0.11
Wheat ratio 0.18 0.49 0.25 0.31 0.44* 0.07 0.41* 0.07
Reduced fertiliser 0.10 0.15 0.15** 0.01 0.12** 0.03 0.11** 0.04
Reduced pesticide 0.082 0.24 0.13** 0.04 0.013 0.84 0.075 0.22
MAEAP )0.24*** 0.01 )0.19** 0.03 )0.14 0.10 )0.19** 0.02
EQIP 0.088 0.17 0.067 0.27 0.11* 0.07 0.14** 0.01
CRP 0.0024 0.97 0.11 0.15 0.052 0.53 0.15** 0.02
CSP )0.12 0.24 )0.18* 0.07 )0.088 0.38 )0.16* 0.06
Education 0.024* 0.07 0.011 0.45 0.033*** 0.00 0.027** 0.01
Wheat ⁄ corn price 0.16 0.28 0.25** 0.04 0.047 0.69 0.12 0.27
Intercept )3.0** 0.02 )2.6* 0.06 )4.5*** 0.00 )4.0*** 0.01
Number of obs. 600 594 604 613
Wald v2(26) 78 66 71 92
Prob. > v2 0 0 0 0
Pseudo R2 0.23 0.22 0.24 0.27
Log likelihood )321 )319 )306 )304

Note: Significant at *10, ***1, **5% levels, respectively.

Only significant variables are reported. See (Ma, 2011) for complete regression results.

by a single hurdle model or a simple tobit model that lacks information on what
farmers would respond to a higher payment offer. Three categories of variables
drive the consideration decision (Table 5).
First, farmers who believe their production can benefit from nature are 5% more
likely to consider enroling in the programme. Previous studies also found that posi-
tive attitudes tended to promote enrolment in conservation programmes (Lynne
et al., 1988; Sheikh et al., 2003), but this study explicitly identifies the significant
impact of production-supporting ecosystem services on farmer decisions. Public
extension and outreach programmes have great potential to improve farmers’ gen-
eral understanding of ecosystem benefits, which would further enhance participation
when combined with perceived positive environmental performance from specific
systems.
Second, the similarity of current farm management practices to the proposed
cropping system also increases willingness to consider the PES programme, reflect-
ing lower perceived risks and less additional cost. Prior practice of conservation till-
age, wheat planting, and reduced fertiliser input are illustrative examples. Farmers
with an additional 10% of land under no-till are 3% more likely to consider adopt-
ing the programme that requires conservation tillage. Farmers with an additional
10% more of their land planted to wheat are 4% more likely to adopt the two
cropping systems that include wheat in the crop rotation. Those who currently own

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618 S. Ma et al.

equipment to band apply fertiliser at a reduced rate are 10% more likely to consider
System D, which requires this.
Third, information variables such as education and past experience with a gov-
ernmental PES programme generally promote willingness-to-consider. One more
year of education increases the probability of considering the PES programme by
about 3%. Prior research has also found positive effects of education on adoption
of farming practices as education largely links to knowledge (Ervin and Ervin,
1982; Rahm and Huffman, 1984; Warriner and Moul, 1992; Bosch et al., 1995; Wu
and Babcock, 1998). It was widely shown that farmers who are currently or were
previously involved in conservation programmes are more likely to participate in a
new programme (Ervin and Ervin, 1982; Bosch et al., 1995; Wu and Babcock, 1998;
Defrancesco et al., 2008; Wei et al., 2009; Bertoni et al., 2011). We find that the
influence of programme experience depends on the objective and restriction of those
programmes. Past programme experience with the Environmental Quality Incentives
Programme (EQIP), which is a flexible governmental PES-type programme, facili-
tates consideration of systems C and D by an additional 10%. However, experience
with the Michigan Agriculture Environmental Assurance Programme (MAEAP)
reduces the probability of considering enrolment by approximately 20%. This may
be due to differences in programme goals between MAEAP and our hypothetical
programme. MAEAP does not involve adoption of changed practices to benefit the
environment; instead, it is designed to reduce farmers’ legal and environmental risks
by education, farm-specific risk assessment and on-site verification of ‘generally
accepted agricultural practices’. A previous study on early-adopting livestock pro-
ducers found the primary motivation to participate in MAEAP was concern about
existing or potential environmental regulations, rather than a predisposition toward
environmental stewardship (Vollmer-Sanders et al., 2011). The Conservation Stew-
ardship Programme (CSP) also has a slightly negative impact on considering two of
our four systems, presumably because lands or conservation practices paid by other
programmes are not eligible for CSP.

5.2 Acreage enrolment decision

While the consideration decision is driven by feasibility and awareness factors, the
acreage enrolment decision modelled by the tobit regression is driven chiefly by ben-
efit–cost criteria (Table 6). First and foremost, the per-acre payment offer has
prominent effects on area enroled in all four cropping systems. As expected, the
price-elasticity of land supplied declines with increasing system complexity. An
increase in the annual payment of $1 ⁄ acre would raise the land area enroled in sys-
tems A, B, C and D by 18, 10, 7 and 4 acres, respectively. Compared to the other
three systems, System A, which requires the smallest change from a conventional
cropping system, has the greatest potential to be expanded simply by increasing the
level of incentive payment.
Second, larger farms enrol more land in the programme. A typical farm with 100
more acres in total cropland area would enrol 20–30 more acres, presumably
because more land is available for production and any fixed costs of adoption can
be spread over more output. This is a common finding in previous studies on con-
servation practice adoption (Lee and Stewart, 1983; Rahm and Huffman, 1984;
Norris and Batie, 1987; Gould et al., 1989; Wu and Babcock, 1998; Damianos and
Giannakopoulos, 2002; Zbinden and Lee, 2005; Lambert et al., 2006; Larsén, 2006).

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 Farmers’ Willingness to Participate in PES Programmes 619

Table 6
Marginal effects from tobit estimation of farmers’ acreage enrolment, weighted by stratum,
by cropping systems, 1,688 Michigan corn or soybean farmers, 2008

System A System B System C System D

Coef. P>z Coef. P>z Coef. P>z Coef. P>z

Descending sequence )360*** 0.00 )57 0.36 )160*** 0.00 )65 0.14
Payment offer 19** 0.02 11*** 0.01 6.6*** 0.00 3.6** 0.01
Perceived env. perf. 190*** 0.00 150*** 0.01 120*** 0.00 140*** 0.00
General ES attitudes )8.2 0.82 )20 0.54 )36** 0.04 )39** 0.04
Total land 0.26*** 0.00 0.28*** 0.00 0.24*** 0.00 0.33*** 0.00
Sandy soil 240* 0.07 24 0.82 17 0.80 75 0.32
Clay soil 390*** 0.00 34 0.73 23 0.71 85 0.20
Moldboard tillage )880*** 0.00 )760** 0.02 )190 0.16 )110 0.43
No till tillage )120 0.62 240 0.14 88 0.45 310*** 0.01
Conservation tillage 120 0.54 120 0.30 14 0.87 150** 0.05
Wheat ratio )460 0.11 310* 0.10 210 0.19 )4.2 0.98
Irrigation ratio 620** 0.01 570** 0.04 )73 0.66 52 0.73
Reduced pesticide )65 0.53 )13 0.19 )120** 0.03 )130** 0.02
EQIP 60 0.54 45 0.58 15 0.80 120** 0.04
CSP 370*** 0.00 170 0.15 100 0.21 )45 0.63
Age 3.6 0.24 4.6 0.22 1.3 0.41 4.5*** 0.01
Wheat ⁄ corn price 440 0.11 )31 0.85 )140 0.18 )360*** 0.00
Wheat ⁄ soybean price )460 0.42 51 0.88 140 0.52 710*** 0.00
Farm income 82 0.38 )55 0.57 95* 0.06 9.4 0.87
Intercept )2,100*** 0.00 )1,300** 0.01 )510* 0.06 )880*** 0.00
Number of obs. 364 372 430 406
Wald v2(26) 2.91 1.56 4.96 5.66
Prob. > v2 0.00 0.04 0.00 0.00
Pseudo R2 0.06 0.05 0.04 0.05
Log likelihood )733 )897 )1,302 )1,318

Note: Significant at *10, **5, ***1% levels, respectively.

Only significant variables are reported. See (Ma, 2011) for complete regression results.

Third, the percentage of moldboard-tilled land has a substantial negative effect

on enrolment but no effect on the consideration decision in any system. One more
percentage point of land under moldboard tillage would decrease land enrolment by
8.8 acres for System A and 7.6 acres for System B. This is presumably due to the
fixed cost of converting from a moldboard plough to a chisel plough, which is
required by all four proposed cropping systems.
Fourth, farms with a higher proportion of irrigated land, more income from
farming or older decision makers are also likely to enrol more acreage in some of
the four systems. Irrigated land tends to use more fertiliser and would need soil
tests to reasonably reduce the nitrogen application. Consistent with Bosch (1995),
farms with a higher irrigation ratio are more likely to enrol in systems A and B,
which include PSNT for avoiding unproductive fertiliser application but do not
strictly cut fertiliser use. Similar to Lambert et al. (2006), this study suggests farms
that rely chiefly on income from agricultural production devote more time and
effort to farming and thus may enrol more land in the proposed programmes. In

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620 S. Ma et al.

contrast, Defrancesco et al. (2008) found that high dependence on farm income con-
strained farms from participating in a northern Italian agri-environmental pro-
gramme because of the potential risk of uncompensated yield reductions. Older
farmers seem to be willing to enrol more acreage if willing to consider enrolment,
though the consideration probit model indicates that they are less likely to consider
enrolment in the programme. The age variable has shown both positive (Warriner
and Moul, 1992; Okoye, 1998) and negative effects in previous studies (Gould et al.,
1989; Neill and Lee, 2001; Damianos and Giannakopoulos, 2002; Lambert et al.,
2006; Giovanopoulou et al., 2011).

6. Conclusion
This study deepens our understanding of farmers’ willingness-to-participate in pay-
ment-for-environmental-services programmes by separating the initial decision on
whether even to consider the programme from the final decision on how many acres
to enrol at a given payment level. Comparison of different econometric models for
estimating and predicting PES enrolment leads to selection of a double hurdle
model, comprised of a probit for willingness to consider and a tobit for acreage
enrolment. The first-stage willingness-to-consider decision is motivated by farm and
farmer characteristics that have non-marginal impacts on land enrolment, such as
environmental attitudes, experience in conservation programmes, education, and
ownership of large equipment. The second-stage land enrolment decision depends
more on payment-driven benefit–cost factors that especially affect the net marginal
benefit of enrolment, such as the per-acre payment offer, total cropland area, irri-
gated land proportion, use of moldboard tillage and whether most income comes
from farming. The results also reveal the price elasticity effect of enrolment. As
expected, the least complex system – a conventional conservation-till corn-soybean
rotation – is most payment responsive. This system also has a large potential
for state-wide adoption due to its suitability to small farms, which are numerous.
The two stages are underpinned by two common factors: perceived environmental
performance of the proposed systems and, importantly, the sequence in which the
systems are presented to respondents.
Understanding farmers’ decision processes is an essential precondition for design-
ing effective and efficient agricultural PES programmes. The two-stage model used
here distinguishes the willingness-to-consider decision from the subsequent enrol-
ment decision, providing fresh insights into how tiered policies can facilitate partici-
pation in PES programmes. For farmers willing to consider PES, the second-stage
land enrolment model reveals factors deterring enrolment that can be overcome
with higher payments. These factors include small land area, high proportion of irri-
gation land, low farm income, young decision maker and high proportion of inten-
sive-tilled land. A small boost in compensation to farms with these traits could
increase the total acreage enrolment from participants and some non-participants
who will consider enroling in PES.
On the other hand, the first-stage willingness-to-consider model identifies farms
with substantial obstacles to participation that are not likely to be resolved by a
higher payment. Three strategies could be employed to raise participation rates at
successively higher cost. First, at relatively low screening cost, PES programmes can
enhance participation by targeting more educated, experienced and properly
equipped farmers who are favourably disposed toward environmental stewardship.

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 Farmers’ Willingness to Participate in PES Programmes 621

Second, research and outreach that build farmer understanding of environmental ser-
vices from agriculture and environmental improvements from specific conservation
practices could also contribute to the appeal of agricultural PES programmes. As a
common determinant for both the consideration and enrolment decision processes,
farmers’ perception of environmental performance from specific practices would also
contribute to acreage enrolment. Third, substantial changes in programme design,
such as subsidising certain farm equipment purchases and relaxing the eligibility of
applicants and lands that are enroled in other programmes, could further engage
farmers who are not likely to consider the programme. This last strategy can be use-
ful to target enrolment by farms with high environmental impact in sensitive areas.
In addition, high-stringency, high-performance programmes will be best received if
offered directly to farmers without alternative low-complexity, low-performance
options. While the farmers surveyed demanded higher payments for more complex
practices, they were more open to complex options when those were not preceded by
simpler ones.
Our analysis of hypothetical PES programmes focuses on total environmental ser-
vices generated, rather than additional ones. This approach has the advantage of
treating equitably both prior providers of environmental services and new ones who
join under the programme. However, from a cost-effectiveness perspective, tax
authorities prefer not to pay for environmental services that would be provided for
free. A reasonable solution would be a split-payment scheme that offers a higher
rate for improved stewardship practice and a lower (but positive) rate for existing
practices. Future research could measure the cost for different payment schemes
between paying for all environmental services and paying only for additional envi-
ronmental services generated by farms enroling in new practices. By combining such
supply-side information with estimates of demand for environmental service
improvements, it should be possible to assess the potential for a PES market in
agriculturally generated environmental services.
As a closing caveat, we note that the supply of environmental services from PES
programmes depends not only on farmer enrolment (the focus of this article), but
also on other factors post-enrolment. Recent articles have highlighted how strategic
behaviour in compliance (Bartolini et al., 2012; Fraser, 2012) and environmental
uncertainties can affect the actual delivery of improved environmental services from
agriculture (Glenk and Colombo, 2011).

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