On-Site Costs and Benefits of Soil Conservation Among Hillside Farmers in El Salvador
AbstractThis study analyses the relationships between farm income, adoption of conservation technologies and output diversification among PAES participants by comparing their performance at two points in time, 2002 and 2005, and against non-participants (control group) in 2005. An endogeneity test confirms that conservation adoption and diversification are endogenous. Therefore, the diversification and adoption equations are estimated first and the predicted values of both endogenous variables are used in a second step as additional explanatory variables in the farm income equation where the latter is estimated using the Tobit technique. The Tobit results are then used to generate the net present value (NPV) and internal rate of return (IRR) of the soil conservation and agroforestry component of PAES between 1998 and 2005. Crop diversification and soil conservation practices exhibit a strong positive association with the length of farmers’ involvement with PAES and their participation in social organizations. Soil conservation practices and crop diversification, measured by an entropy index, significantly increase farm income, which highlights the strategic role of diversification in fighting rural poverty. The positive association between conservation practices and income contrasts with the effects of conservation structures, which is negative but non-significant. A substantial body of literature increasingly recognizes that structures are expensive to build and maintain whereas they add little to the land productivity in the short run. Such drawbacks may clearly affect the profitability of these conservation technologies.Then we compare cost and benefit figures over the life-span of PAES (1998-2005) to compute the IRR and NPV. Average income gains per family per year amount to $280, while the NPV is $13,674,100 at a 12% discount rate with an IRR of 48.45%. These indicators clearly reveal that the soil conservation and agroforestry component of PAES has been highly profitable, which is in line with similar evaluations of natural resource management programs in Central America and elsewhere. Finally, the estimates of NPV and IRR are robust, according to diverse scenarios generated using bootstrapping and sensitivity analysis.
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Bibliographic InfoPaper provided by Inter-American Development Bank, Office of Evaluation and Oversight (OVE) in its series OVE Working Papers with number 0407.
Length: 44 pages
Date of creation: Nov 2007
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-AGR-2008-02-23 (Agricultural Economics)
- NEP-ALL-2008-02-23 (All new papers)
- NEP-DEV-2008-02-23 (Development)
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