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Abstract
The overall aim of this study is to empirically investigate the cost structure of a management agreement type
agri-environmental instrument and to identify factors for cost variation over space and time. We control for the
actual level of compliance by using compliance weighted average scheme cost ratios. Beside technological and
economic performance measures, we also incorporate risk proxies. In addition, we consider unobserved
heterogeneity or path dependency with respect to unknown administrative, spatial and farm specific factors.
Hence, we try to disentangle random and fixed scheme cost effects by applying a bootstrapped mixed-effects
regression approach using the empirical case of the Environmental Stewardship Scheme in the UK. Regional
and sectoral variation in the scheme uptake and the cost of compliance for the participating farms lead to
significant cost effects reflecting heterogeneity with respect to management skills and attitudes, production
focus, location, technologies, economic performance and risk.