Participation in Payments for Ecosystem Services programmes: accounting for participant heterogeneity

This article examines heterogeneity in the preferences of households regarding participation in a Payments for Ecosystem Services (PES) programme. We argue that such heterogeneity is particularly likely for schemes that are implemented in a developing-country setting, where households differ in their degree of integration into markets. We use the case study of the Sloping Land Conversion Programme (SLCP) in China, one of the largest PES schemes in the world. As the SLCP is not voluntary in all cases, we compare the determinants of observed participation with households’ stated preferences about future participation. Our analysis uses a novel latent-class approach to model the household decision over whether to sign up to a PES programme. Allowing for variation in the parameters of the decision process, we find significant differences between households with good access to markets and those facing market imperfections.