An investigation of policy administrative costs using panel data for the English Environmentally Sensitive Areas

This paper explores transactions costs in the context of agri-environmental policy schemes based on management agreements. While transactions costs en compass a wide range of organisational costs, the focus here is on the publ ic-sector administrative costs of policy implementation Empirical administr ative cost functions were estimated to investigate the factors affecting th e magnitude of such costs, using panel data spanning five years for the 22 English Environmentally Sensitive Areas. The extent of participation appear s to be important in explaining administrative cost variability across area s. The data suggested the existence of size economics with regard to the nu mbers of agreements made in any one ESA, and a significant effect of scheme experience in exerting downwards-pressure on administrative costs. Policy budgeting and evaluation should take into account the non-trivial costs of organisation, particularly if agri-environmental schemes based on the procu rement of conservation goods through management agreements are to be extend ed in future.