Examining the long-term effects of direct payments for agricultural multifunctionality in Japan

As the global economy progresses and the endowment of resources and production technologies for each country’s industry becomes clearer, policymakers in countries with comparative disadvantage in agriculture are under pressure to ensure its sustainability. Japan, the focus of this study, introduced the Multifunctional Payment System in 2014 as a direct payment scheme inspired by the framework of payments for environmental/ecological services. Numerous studies have examined the short-term effects of this policy, but little is known about whether these effects persist or change with long-term policy participation. Using data from Ishikawa Prefecture and applying propensity score matching and inverse probability weighting, we estimate the policy effects on changes in reported collective conservation activities, rather than directly measured ecological outcomes. The results show that the estimated long-term effect on reported activities is approximately 40% larger than the short-term effect, suggesting persistence beyond a single contract period. However, policy effects differ substantially by activity type, and the heterogeneity in treatment effects is consistent with a possible decline in intrinsic community motivation for collective action. To amplify the beneficial effects of the policy, additional incentives for long-term participation and a flexible policy design based on endowment of local resources may be necessary.