Contract noncompliance in agricultural conservation programs: Panel evidence from Louisiana, USA

Abstract

Cost-share contracts, offered through working lands programs, are instrumental in addressing environmental externalities from agriculture and generating ecosystem services. However, the persistent trend of noncompliance with cost-share contractual terms has become a problem for funding agencies and policymakers. This paper aims to study noncompliance issues within the US working lands programs using historical county-level panel data (1997–2019) from Louisiana. The results show that noncompliance is attributed more to cancellations than terminations due to flexible provisions within the cancellation option. The significant incentive effect of payment obligations reveals that revisiting payment rates could reduce contract noncompliance and mitigate moral hazard.