Are non-market values important to smallholders' afforestation decisions? A psychometric segmentation and its implications for afforestation programs

Abstract

We use an innovative approach to improve the effectiveness of smallholder afforestation programs by psychometrically segmenting a population based on preferences for the market and non-market values of trees.202 randomly selected smallholders in Nicaragua were presented with nine discrete choice experiments of possible afforestation contracts with varying attribute levels of market and non-market values and were asked in which program they would choose to participate.We estimate unobservable smallholder-specific preferences for afforestation program attributes as a function of observable socio-demographic variables using conditional distributions from a random coefficient logit model. Cluster analysis was used to segment the population based on these preferences and socio-demographic characteristics.Smallholder preferences for non-market values are found to increase with distance to market and to be more important than market values in afforestation decisions. Two well-defined smallholder segments are identified. The first is characterized as market-oriented, placing less importance on non-market values. The second is characterized as unwilling to participate in afforestation programs without non-market values. These findings cast doubt on the reliance of market values as the primary determinant of smallholders' afforestation decisions and imply that programs could be designed more cost effectively by bundling different attributes for different segments of the population.