On the Regulation of Small Actors: Three Experimental Essays about Policies based on

150 Pages·2016·2.06 MB·English

On the Regulation of Small Actors: Three Experimental Essays about Policies based on
Voluntary Compliance and Decentralized Monitoring
by
Luz Angela Rodriguez
University Program in Environmental Policy
Duke University

Date: _______________________
Approved:

___________________________
Alexander Pfaff, Supervisor

___________________________
Margaret McKean

___________________________
Frederick Mayer

___________________________
Subhrendu Pattanayak

Dissertation submitted in partial fulfillment of the requirements for the degree of Doctor
of Philosophy in the University Program in Environmental Policy in the Graduate
School of Duke University

2016

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ABSTRACT
On the Regulation of Small Actors: Three Experimental Essays about Policies based on
Voluntary Compliace and Decentralized Monitoring
by
Luz Angela Rodriguez
University Program in Environmental Policy
Duke University

Date: _______________________
Approved:

___________________________
Alexander Pfaff, Supervisor

___________________________
Margaret McKean

___________________________
Frederick Mayer

___________________________
Subhrendu Pattanayak

An abstract of a dissertation submitted in partial fulfillment of the requirements for the
degree of Doctor of Philosophy in the University Program in Environmental Policy in
the Graduate School of Duke University

2016
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Copyright by
Luz Angela Rodriguez
2016
Abstract
Monitoring and enforcement are perhaps the biggest challenges in the design
and implementation of environmental policies in developing countries where the actions
of many small informal actors cause significant impacts on the ecosystem services and
where the transaction costs for the state to regulate them could be enormous. This
dissertation studies the potential of innovative institutions based on decentralized
coordination and enforcement to induce better environmental outcomes. Such policies
have in common that the state plays the role of providing the incentives for organization
but the process of compliance happens through decentralized agreements, trust
building, signaling and monitoring. I draw from the literatures in collective action,
common-pool resources, game-theory and non-point source pollution to develop the
instruments proposed here. To test the different conditions in which such policies could
be implemented I designed two field-experiments that I conducted with small-scale gold
miners in the Colombian Pacific and with users and providers of ecosystem services in
the states of Veracruz, Quintana Roo and Yucatan in Mexico. This dissertation is
organized in three essays.
The first essay, “Collective Incentives for Cleaner Small-Scale Gold Mining on the
Frontier: Experimental Tests of Compliance with Group Incentives given Limited State
Monitoring”, examines whether collective incentives, i.e. incentives provided to a group

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conditional on collective compliance, could “outsource” the required local monitoring,
i.e. induce group interactions that extend the reach of the state that can observe only
aggregate consequences in the context of small-scale gold mining. I employed a framed
field-lab experiment in which the miners make decisions regarding mining intensity.
The state sets a collective target for an environmental outcome, verifies compliance and
provides a group reward for compliance which is split equally among members. Since
the target set by the state transforms the situation into a coordination game, outcomes
depend on expectations of what others will do. I conducted this experiment with 640
participants in a mining region of the Colombian Pacific and I examine different levels of
policy severity and their ordering. The findings of the experiment suggest that such
instruments can induce compliance but this regulation involves tradeoffs. For most
severe targets – with rewards just above costs – raise gains if successful but can collapse
rapidly and completely. In terms of group interactions, better outcomes are found when
severity initially is lower suggesting learning.
The second essay, “Collective Compliance can be Efficient and Inequitable: Impacts of
Leaders among Small-Scale Gold Miners in Colombia”, explores the channels through which
communication help groups to coordinate in presence of collective incentives and
whether the reached solutions are equitable or not. Also in the context of small-scale
gold mining in the Colombian Pacific, I test the effect of communication in compliance
with a collective environmental target. The results suggest that communication, as

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expected, helps to solve coordination challenges but still some groups reach agreements
involving unequal outcomes. By examining the agreements that took place in each
group, I observe that the main coordination mechanism was the presence of leaders that
help other group members to clarify the situation. Interestingly, leaders not only helped
groups to reach efficiency but also played a key role in equity by defining how the costs
of compliance would be distributed among group members.
The third essay, “Creating Local PES Institutions and Increasing Impacts of PES in
Mexico: A real-Time Watershed-Level Framed Field Experiment on Coordination and
Conditionality”, considers the creation of a local payments for ecosystem services (PES)
mechanism as an assurance game that requires the coordination between two groups of
participants: upstream and downstream. Based on this assurance interaction, I explore
the effect of allowing peer-sanctions on upstream behavior in the functioning of the
mechanism. This field-lab experiment was implemented in three real cases of the
Mexican Fondos Concurrentes (matching funds) program in the states of Veracruz,
Quintana Roo and Yucatan, where 240 real users and 240 real providers of hydrological
services were recruited and interacted with each other in real time. The experimental
results suggest that initial trust-game behaviors align with participants’ perceptions and
predicts baseline giving in assurance game. For upstream providers, i.e. those who get
sanctioned, the threat and the use of sanctions increase contributions. Downstream users
contribute less when offered the option to sanction – as if that option signal an

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uncooperative upstream – then the contributions rise in line with the complementarity
in payments of the assurance game.

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Contents
Abstract ......................................................................................................................................... iv
List of Tables ................................................................................................................................ xii
List of Figures .............................................................................................................................xiv
Acknowledgements .................................................................................................................... xv
1. Introduction ............................................................................................................................... 1
2. Collective Incentives for Cleaner Small-Scale Gold Mining on the Frontier:
Experimental Test of Compliance with Group Incentives given Limited State Monitoring
......................................................................................................................................................... 7
2.1 Introduction ....................................................................................................................... 7
2.2 Literature ......................................................................................................................... 11
2.2.1 Collective Incentives with Exogenous Targets and Compliance ........................ 11
2.2.2 Experimental Literature: Non-point Source Pollution and Threshold Public
Goods ................................................................................................................................... 14
2.3 Setting ............................................................................................................................... 16
2.4 Experimental Design and Implementation ................................................................. 19
2.4.1 Design ......................................................................................................................... 19
2.4.2 Research Questions and Treatments....................................................................... 23
2.4.3 Participants ................................................................................................................. 24
2.5 Results .............................................................................................................................. 26
2.5.1 Graphs and Descriptive Statistics ........................................................................... 26
2.5.1.1 Toughest Target, Breakdown by Group ......................................................... 30
2.5.1.2 All Targets, Breakdown by Efficiency and Symmetry .................................. 32

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2.5.2 Econometric Confirmations and Extensions ......................................................... 33
2.6 Discussion ........................................................................................................................ 37
3. Collective Compliance can be Efficient and Inequitable: Impacts of Leaders among
Small-Scale Gold Miners in Colombia ..................................................................................... 41
3.1 Introduction ..................................................................................................................... 41
3.2 Literature ......................................................................................................................... 45
3.2.1 Collective Action in Natural Resources Management ......................................... 45
3.2.2 Coordination and Communication in Experiments ............................................. 48
3.3 Experimental Design and Field Setting ....................................................................... 50
3.3.1. Experimental Design ................................................................................................ 50
3.3.2. Field Setting ............................................................................................................... 54
3.4 Results .............................................................................................................................. 57
3.4.1. Collective Incentives and Efficiency ...................................................................... 59
3.4.2. Communication Impacts on Efficiency ................................................................. 61
3.4.2.1 Eliminating Inefficient Overcompliance ......................................................... 61
3.4.2.2 Improving Group Function in Challenging Situations................................. 62
3.4.3. Communication Impacts on Equity ....................................................................... 63
3.4.3.1 Symmetric Efficient Group Outcomes ............................................................ 63
3.4.3.2 Individual Choices Supporting Symmetric Equilibria (Both Efficient and
Inefficient) ....................................................................................................................... 64
3.4.4. Communication Leader’s Impact ........................................................................... 67
3.4.4.1 Leaders and Group Efficiency (Total Pumps and Compliance) .................. 67
3.4.4.2 Leaders and Group Equity ............................................................................... 71

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3.5 Discussion ........................................................................................................................ 73
4. Creating Local PES Institutions and Increasing Impacts of PES in Mexico: A Real-Time
Watershed Level Framed Field Experiment on Coordination and Conditionality ........... 76
4.1 Introduction ..................................................................................................................... 76
4.2 PES in Mexico: Two Major Federal Forest Initiatives and Our Sites ....................... 83
4.2.1 CONAFOR’s National Program of State-Landowner Payment ......................... 83
4.2.2 Fondos Concurrentes: Creating New, Local PES Mechanisms .............................. 85
4.2.3 Our Sites (within Fondos) .......................................................................................... 87
4.3 Upstream-Downstream PES Assurance Game .......................................................... 91
4.3.1 Assurance between Groups (Free-Riding at Each End) ....................................... 92
4.3.2 Information and Sanctioning in Group-Group Coordination ............................ 95
4.3.3 Recruitment and Implementation ........................................................................... 98
4.4 Results ............................................................................................................................ 100
4.4.1 Trust Game ............................................................................................................... 100
4.4.2 Assurance Game ...................................................................................................... 102
4.4.3 Upstream Contributions and Sanctions (threats and uses) ............................... 103
4.4.4 Downstream Contributions and Sanctions (options and uses) ........................ 108
4.5 Discussion ...................................................................................................................... 111
Appendix A – Total pumps by round and group Game 1 .................................................. 115
Appendix B – Total pumps by round and group Game 2 .................................................. 118
Appendix C – Materials Used in Assurance Experiment .................................................... 120
Appendix D – Assurance Contributions (per site and treatment) ..................................... 122

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