Do Payments Pay Off? Evidence from Participation in Costa Rica's PES Program

Payments for environmental services (PES) are often viewed as a way to simultaneously improve conservation outcomes and the wellbeing of rural households who receive the payments. However, evidence for such win-win outcomes has been elusive. We add to the growing literature on conservation program impacts by using primary household survey data to evaluate the socioeconomic impacts of participation in Costa Rica's PES program. Despite the substantial cash transfers to voluntary participants in this program, we do not detect any evidence of impacts on their wealth or self-reported well-being using a quasi-experimental design. These results are consistent with the common claim that voluntary PES do not harm participants, but they beg the question of why landowners participate if they do not benefit. Landowners in our sample voluntarily renewed their contracts after five years in the program and thus are unlikely to have underestimated their costs of participation. They apparently did not invest additional income from the program in farm inputs such as cattle or hired labor, since both decreased as a result of participation. Nor do we find evidence that participation encouraged moves off-farm. Instead, semi-structured interviews suggest that participants joined the program to secure their property rights and contribute to the public good of forest conservation. Thus, in order to understand the social impacts of PES, we need to look beyond simple economic rationales and material outcomes.