Economic Incentives for Entry and Exit in Gum Arabic Agroforestry System in Sudan
AbstractThe gum tree (Acacia senegal) in the Sahel-Sudan zone has many environmental benign functions. An important function is to control desertification. In this paper we analyze farmers' economic incentives to preserve the existing gum trees and their incentives to create new plantations using a real options approach. Results indicate that agricultural crops provide higher economic benefits as compared to gum agroforestry system. However, on the one hand, as gum arabic is produced during the dry period and land is abundant, there are low incentives for deforestation. Instead, farmers' tend to leave the land idle and let the tree growing. On the other hand, our results suggest that an increase in the prices of gum arabic of about 330 per cent is needed to induce entry and a shift in land use system from continuous agricultural production to gum agroforestry system.
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Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25720.
Date of creation: 2006
Date of revision:
gum arabic; deforestation; entry and exit; real options; Sudan; Crop Production/Industries; D4; N5; O13; Q12; Q23;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
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- Holden, Stein T. & Shiferaw, Bekele & Wik, Mette, 1998. "Poverty, market imperfections and time preferences: of relevance for environmental policy?," Environment and Development Economics, Cambridge University Press, vol. 3(01), pages 105-130, February.
- Xianlei Ma & Justus Wesseler & Nico Heerink & Futian Qu, 2013. "Land Tenure Reforms and Land Conservation Investments in China ¨C What Does Real Option Value Theory Tell Us?," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 19-33, August.
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