Coasian payments for agricultural external benefits - an empirical cross-section analysis

This paper deals with a cross section analysis of local compensation payments to farmers for their provision of landscape amenities in alpine tourist communities. These payments can be interpreted as the outcomes of Coasian negotiations. Based on Austrian data we empirically identify the underlying determinants of the negotiating process. The probability for a positive negotiation outcome depends on politico-economic factors such as municipal revenues per resident and the share of votes for distinct parties in parliamentary elections. Whereas benefits associated with landscape amenities also play an important role transaction costs of bargaining are of minor relevance. If the variety of the countryside seems to be endangered tourist communities start compensating their farmers for landscape-enhancing activities. Local subsidy schemes supplement European Union and national policies in support of rural areas as they internalize positive agricultural externalities.