Does Payment for Ecosystem Services Improve Technical Efficiency of Forage Production? Evidence From China's Grassland Ecological Compensation Policy

ABSTRACT China's Grassland Ecological Compensation Policy (GECP) is the world's most extensive grassland conservation program, based on a payment‐ for‐ ecosystem‐ services framework. Despite comprehensive studies on its impact, the underlying mechanisms remain unclear. Using survey data collected from 1039 forage farmers in Gansu and Qinghai provinces in China, this study employs a propensity score matching approach to address selection bias from observable factors. A selectivity‐corrected stochastic production frontier model was subsequently applied to correct for the bias due to unobservable characteristics. We find that GECP increased technical efficiency by more than 5.7%. Moreover, the unconditional quantile regression results demonstrate that farmers with higher TE quantiles benefit more from GECP than farmers with lower TE quantiles.