Conference Agenda

Agricultural expansion accounts for nearly 90% of global deforestation, motivating the adoption of Payment for Ecosystem Services (PES) programs. Existing studies establish moderate effectiveness of PES in reducing average deforestation, but evidence remains limited on how institutional design—contractual ownership and payment scheme interactions—shapes conservation performance. A PES program in Ecuador provides a unique setting by combining individual and collective contracts with a multi-threshold payment scheme and staggered adoption. Our analysis provides the first causal evidence on the effect of both contracts and pricing rules operating in a real-world PES. We construct a 24-year panel covering the universe of PES contract sites (approximately 64,800 unit-year observations) along with administrative records, to estimate treatment effects and heterogeneity of each contract type on deforestation, using Matrix-Completion with Nuclear Norm Minimization. We benchmark these estimates against staggered difference-in-differences estimators. We find that collective contracts reduce deforestation by 1.7–2.5 percentage points more than individual contracts, equivalent to roughly 129–196 fewer hectares deforested per average collective contract-year. This advantage persists in areas with high land-use opportunity costs, suggesting that ownership structure and pricing rules matter beyond baseline land characteristics. Heterogeneity analysis points to payment design as a central mechanism: low-remunerated tiers weaken conservation incentives, while a premium threshold induces strategic bunching and adverse selection by attracting higher-deforestation-risk individual contracts. Prioritizing collective contracts, smoothing nonlinear payment schemes and redesigning equity-motivated premium payments can improve the impact and cost-effectiveness of large-scale PES programs.