Assessing the Economy-Wide Effects of Costa Rica's Payments for Environmental Services Program

Costa Rica's Program of Payments
for Environmental Services (Pago de Servicios Ambientales,
PSA) provides a unique opportunity to evaluate direct
payments as a conservation policy tool. This paper reports
evidence on how much more forest has been conserved in Costa
Rica as a result of PSA contracts with landowners. Such
evidence requires estimating a counterfactual outcome: how
much forest would have been preserved if there had been no
payments. By applying rigorous program evaluation methods
that have been recommended for identifying the causal
effects of conservation policies, we find that the PSA
program does result in a small but statistically significant
increase in the area of forest conserved.