Slippage Effects in Payment for Ecosystem Services in China: The Case of the Sloping Land Conversion Program

Abstract

 This study investigates the existence of the slippage effect (unintended increase in cultivation) due to the payment for ecosystem services (PES) in China. To this end we use the data of the Sloping Land Conversion Program (SLCP), one of the largest PES programs for crop retirement in the world. We construct the panel data for 24 provinces during the period of 2000-2012. The data are then analyzed by the fixed-effects model and pooled ordinary least aquares (OLS) model to account for unobserved heterogeneity among provinces and time periods. Under different variables and estimations, our models provide fairly consistent estimates, indicating that the slippage effect of the SLCP is statistically highly significant. The magnitude of the slip-page is estimated to be much smaller than other similar programs such as the Conservation Reserve Program in the U.S. However, since the SLCP accounts for about 5% of the total agricultural area, even a small slippage must be accorded considerable attention; policymakers must reduce its impact and maintain ecosystem services in the region.