On the Institutional Design of Agri-Environmental Contracts: Evidence from Preferences, Attitudes, and Identities

This cumulative dissertation consists of three standalone articles, each examining the institutional design of agri-environmental contracts. Such contracts are a key policy instrument to encourage farmers to provide ecosystem services. Their effectiveness largely depends on whether their institutional design accounts for the decision-making logic and motivations of the actors involved. However, there is still insufficient research on how different contract attributes affect farmers’ behaviour and how differently designed contracts are perceived by other stakeholders. The overall aim of this dissertation is therefore to analyse, from an institutional and behavioural economics perspective, how the design of agri-environmental contracts can increase participation and thereby contribute more effectively to biodiversity and climate protection goals. The three articles build on each other both in terms of content and methodology. The first article provides a systematic review of the empirical literature on farmers’ preferences regarding agri-environmental contracts worldwide. The second article uses original data from Germany to examine how farmers, policy-makers, and intermediary organisations assess contract designs and which institutional features they prioritise. The third article analyses farmers’ preferences for privately financed agri-environmental contracts and derives implications for the further development of both private and public programmes. In detail, the first article addresses the question: What is the current state of stated preference research for agri-environmental contract design? Depending on the geographical context, such contracts are designed in different ways and are referred to as Payments for Ecosystem Services, agri-environmental climate measures (AECMs), or Conservation Covenants. Despite these differences, they share the common goal of promoting the provision of ecosystem services through voluntary participation. Suitable incentive mechanisms are therefore crucial for increasing attractiveness and participation. Against this backdrop, research has increasingly relied on experimental methods, resulting in a large body of empirical studies. This article systematically reviews peer-reviewed literature applying Discrete Choice Experiments (DCEs) with farmers in the context of agri-environmental contracts. DCEs are particularly well suited for analysing preferences prior to policy implementation. The review identifies two main types of studies: those focusing on land-use prescriptions (e.g. fertiliser restrictions, soil or livestock management) and those examining contract design attributes (e.g. contract length, technical assistance, monitoring). The latter are further divided into incentive attributes, which motivate participation, and committment attributes, which determine the effort required for compliance. The article organises the findings accordingly, places them in context, identifies research gaps, and discusses methodological developments in applying DCEs with farmers. Building on this literature review, the second article takes an empirical perspective on the views of key stakeholders and asks: How would the design of agrienvironmental contracts look based on stakeholder attitudes? To this end, 25 representatives from farming, agricultural advisory services, and policy in Brandenburg, Germany, were interviewed using Q-methodology to identify shared and divergent viewpoints. Including multiple stakeholder groups made it possible to capture both institutional differences and areas of overlap in priorities. In the interviews, participants ranked predefined statements on contract attributes and subsequently weighted them. The analysis revealed three central narratives, each of which can be interpreted as a draft programme design: a low-threshold programme, a targeted nature conservation programme, and an agroecological farm system programme. The results show that in some cases, similar perspectives exist across institutional roles, highlighting the potential for broadly acceptable contract models. The third article builds on the research gaps identified in the first and incorporates insights from the second to analyse farmers’ preferences for public and private agri-environmental contracts. At its core, it asks: What are farmers’ preferences for privately financed agri-environmental contracts? The analysis is based on a DCE with German grassland farmers that examines preferences for a set of innovative contract attributes. It explores whether privately financed contracts are a suitable instrument for promoting environmentally friendly farming and whether they can facilitate the adoption of innovative elements such as results-based payments or collective approaches. Like publicly financed contracts, private contracts are voluntary and therefore require carefully designed incentives. The article compares preferences for public and private contracts and examines whether farmers find results-based and collective approaches attractive. It also investigates how farmers’ identities shape preference heterogeneity. A common distinction is made between productivist farmers, who prioritise high yields, and environmentalist farmers, who view conservation efforts as an expression of professional competence. The results show that, on average, farmers demand lower compensation for participation in public contracts than in private contracts. Regardless of contract type, they request higher payments when contracts involve results-based payments or collective implementation. At the same time, preferences are highly heterogeneous, with a considerable share of this variation explained by farmers’ identities: environmentally oriented farmers demand lower compensation and are willing to enrol more land than their predominantly productivist counterparts. The dissertation concludes with a synthesis that summarises the main findings and derives five key insights, including practical implications and methodological reflections. In particular, it highlights the value of Q-methodology for capturing stakeholder perspectives and for informing the selection of attributes in choice experiments. It also reflects on the complexity of farmers’ decision-making processes and underlines the importance of integrating behavioural variables such as identity. Substantively, the synthesis discusses farmers’ responses to innovative contract attributes and privately financed models. Finally, it provides a critical reflection on methodological limitations and outlines avenues for future research, including potential extensions of the three articles presented.