Targeting Incentives to Reduce Habitat Fragmentation
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This paper develops a theoretical model to analyze the spatial targeting of incentives for the restoration of forested landscapes when wildlife habitat can be enhanced by reducing fragmentation. The key theoretical result is that the marginal net benefits of increasing forest are convex, indicating that corner solutions – converting either none or all of the agricultural land in a section to forest – may be optimal. Corner solutions are directly linked to the spatial process determining habitat benefits and the regulator’s incomplete information regarding landowner opportunity costs. We present findings from a large-scale empirical landscape simulation that supports our key theoretical results.