Effects of a grazing permit market on pastoralist behavior and overgrazing in Kenya

The success of market-based mechanisms in reducing conflicts and internalizing externalities depends on their ability to clarify property rights amongst heterogenous resource users. We investigate the effectiveness of novel markets in achieving their goals using the case study of grazing markets in Laikipia County, Kenya. In this system, sheep- and goat (shoat)- and cattle-rearing pastoralists negotiate land access for cattle with neighboring cattle ranchers. Using data on pastoralists' livestock and contracting preferences and a model of pastoral herd management, we show that contracting for cattle grazing access on private property alters relative input shadow prices for grazing resources in communal pastoral lands, ultimately resulting in relieved cattle grazing pressure. However, the permitting process is less attractive to pastoralists who prefer rearing shoats instead of cattle. These shoat-rearing pastoralists instead fill some of the vacated space with shoats instead of purchasing permits themselves. This leakage offsets some of the conservation benefits arising from the contracting program and results in a greater share of shoats in the communal herd mix. Approximately 0.59 cows' worth of free space persists on the commons per permit sold, indicating reduced grazing pressure, but this represents a small proportion (3.8%) of the total livestock in the system. The narrow introduction of the cattle-focused permit market and lack of strong management institutions on the commons dampen the permitting program's conservation benefits, necessitating further interventions. Alleviating these factors and dramatically scaling up the program has the potential to turn the permitting system into a successful conservation tool.