Evaluating Land Stewardship with Ecological Compensation Schemes in Upstream Rural Households

Abstract

The degradation of watershed ecosystems presents a profound challenge to global environmental sustainability, necessitating effective policy interventions to align the incentives of upstream land users with the provision of downstream ecological services. Ecological compensation schemes, widely implemented as a variant of payments for ecosystem services, aim to bridge this incentive gap by financially rewarding rural households for adopting sustainable land stewardship practices. This paper presents a comprehensive evaluation of such schemes by employing difference analysis to assess their impact on the agricultural and environmental behaviors of upstream rural households. By analyzing cross-sectional and retrospective panel data through a rigorous counterfactual framework, the study isolates the causal effects of compensation programs on indicators of land stewardship, including the reduction of agrochemical inputs, the adoption of organic fertilizers, and the implementation of soil and water conservation measures. The findings indicate that ecological compensation significantly enhances pro-environmental land management, although the magnitude of this effect exhibits substantial heterogeneity based on household socioeconomic characteristics, off-farm employment opportunities, and land tenure security. Furthermore, the analysis reveals that financial incentives must be complemented by technical extension services and robust community monitoring to sustain long-term behavioral changes. The results provide critical evidence for policymakers seeking to optimize the design, targeting, and conditionality of environmental compensation programs to achieve durable ecological outcomes while supporting rural livelihoods.