by the fact that non-beneficiaries have not experienced the extra labor cost of participating in the program, or that the opportunity costs of beneficiaries are higher due to targeting on deforestation risk. Because these differences seem to suggest learning about the costs of participating in the program, and because we prefer the results including the more nuanced set of covariates, in later simulations that use non-beneficiary WTA, we use the coefficients from the beneficiary estimates (column (5), Table A10) to predict median WTA for non-beneficiaries. Note that in all cases the average median values are lower than the minimum value actually offered by the program (280 pesos per hectare).

Figure 3 shows the sample distribution of differences between the real payment per hectare received by the community, and the estimated median willingness to accept. In 80% of the cases, the actual payment is higher than the median WTA, which we expect, given that communities are already participating in the program. Of the 10% of the beneficiaries where the median WTA is greater than the actual payment, half are within 50 pesos. In approximately 80 percent of the cases where WTA is less than the actual payment, the estimate of median WTA is more than 100 pesos less than they are actually being paid. This implies there is a substantial transfer in excess of participation costs to communities enrolled in the program<sup>13</sup> .

These estimates display a reasonable order of magnitude when compared to available information on agricultural profits in Mexico. Using estimates from a previous paper on locality-level production values (Sims & Alix-Garcia 2017)<sup>14</sup> , the median locality-level revenue for the states in our survey that received some PSA payments is 731 pesos per hectare. Although profit margins are not available for Mexico, for small, family-owned US farms with sales less than $150,000 per year, 76% have profit margins of less than 10%, and only 16% report margins greater than 20% (USDA 2013). A 10% profit margin on 731 pesos per hectare of revenue suggests profits of less than 100 pesos per hectare – implying both that our WTA estimates display a correct order of magnitude to

> 13Analysis of household impacts from the 2011-2014 cohorts (Alix-Garcia, Sims, Orozco-Olvera & et al. 2018) suggests no significant gains in household wealth, but does find significant investment in communal assets and substantial increases in local land-cover management activities. Surplus payments are likely beneficial to the community and may result in external benefits through land conservation. We do not take a stand on the objective function of CONAFOR, which may wish to keep average payments for participating communities higher than estimated WTA.

> 14The estimates are derived from municipal level production revenues from principle crops and livestock in 2003 (the first year of the PSA program). We normalize the revenues by non-forested area of the municipality to calculate an average value of production per non-forested hectare. We regress these revenues on municipal averages of geographic covariates and predict the locality-level production values using the locality values of those covariates. These measures therefore provide a village-level approximation of agricultural revenues, but no measure of cost.

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