two essays on socio economic aspects of soil_degradation potx

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of soil degradation Dirt poor: poverty, farmers and soil resource investment by Leslie Lipper

Methodological issues in analysing the linkages between socio-economic and environmental systems

by

Dan Osgood and Leslie Lipper

PAPER

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Soil degradation is major global environmental problem, having widespread and serious negative elect on water quality an biodiversity and pronvaing the emnssion of ema changing sveenhouse gases, The chemical and physical deterioration of soils severely compromises sgriculral productivity andthe incomes af some of the poorest members ofthe global society ‘According to the nterational Foo Policy Research Institute's caleulatons, soil degradation -lfesl the productivity of of 40 percent ofthe worlds ngrieukral land on average with rates Uupto 75 percent for some regions A primary cause of sol degradation is sil depletion sssociated ‘with farting Although farmers themselves may benefit fom higher levels of soi quality U has proven difficult to achieve the changes in farm management practices necessity to revch ths goal How farmers make decisions ahout the management of soil resources athe constrains they face isan issue that is sill not well understood, At the same time, understanding this process is a itil requirement for improving policy-making for sustainable development ‘The issue is particularly important in the eontet of al poverty as improwing the quality and produetivity of soil resources is often a key component of rural poverty alleviation, and because

Poverty isa major determinant ofthe way in which people make decisions about resource use

Inthe wo papers presente in his volume the relationship berween socio-economic conditions aun soi degradation is explored using bat qualitative ad quantitative approaches Tn he fest, paper by Lipper the focus ison providing ater understanding ofthe incentives and constants faced by poor farmers in making soil management decisions The ist part of the paper focuses ‘onthe relationship hesween soi degradation and agricultural productivity The ndings indicate thatthe farm level cost associated with soit depletion ate quite hetowygencous across varying

soil types and cropping pattems, as ate she eosts associated with reversing or daereasng the rosess of degeaation, The secon arco te pape leseribes the major findings inthe economic literature on the impact of varying manifestalions of poverty on sel resouece managensent ‘One imponant way in which povery influences the incentives of producers 10 invest in oil resources is by increasing the value to he farmer of a secur fod or income source Since pooe

farmers are exposed to higher levels of risk, measures which dserease previition variability ‘may have a greater value to hem, thus creating incentives to invest in soil conservation At the same time, poor producers have less capacity to insure in formal markets andthe means they adopt to manage tei isk may tesut in disincentives to oil estes investments, particulary those which ae lumpy and not easily lquiied Other barriers to investment such a nsabiity in property rights regimes and lack of aoess to financial services were fou tobe significantly Jhigher amongst poor producers However he evidence onthe relauonship hee soil esource endowments and socie-economic conlitians was found to be inconclusive at present, with 3 nood fr futher studies in onder to determine whether this issue ia significant disincentive to soilresoure investment among the poo The paper concludes witha discussion ofthe research ‘needs which are implied by dhe information gaps idenitiedthroushout de analysis

‘The second paper in the volume by Osgood and Lipper addresses one of the research gaps ‘denied in the first paper: th causal relationships between socio-economic condions and soil degradation

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“This paper discusses the methodological issues which arise in conducting such an analysis ‘through an applied example in which econometric anklysis of socio-economic and geographic information systems data is performed In particular, issues of endogeneity inthe analysis of dynamic systems, and the integration of data across varying scales are eased, aad empirical ‘examples for their treatment ae presente

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Anstaacr Amani xi

Dur roon: roves

2, Natural resourees in agricultural production 3.1 — Natural resourees asa capital asset ie inven pono a 4 22.1 Time preferences Tnvesiment under and investment uncertainty 5 7 23 Natural capital in agricultural produetion: farm evel income an Tmuaneseedeee CC CC — 18

24.1 Relationship between sol resources and averase agricultural productivity fevels 0 2.32 Impact of evsion on erp vield waraiiny 3 16

253 Costs of soi conserving and miligaing inputs 0 A a 4 the investment profile of poor apriclrl producers 2

TEL Natural cial endowments and the cidence SL Productivity enhancing natural capital endowment and he OT ER L.2 The she of nara cpa ane Ta Ie income geneaing

‘pacity of poor agriculural producers n 3.2 Insitutions and socess to natural capital assets among poor agrcullaral peadacers 28 3.3 Accoss ‘$1 Poverty, risk and insurance mechanisms to financial capital 5 3

Pover and the discon 36

4 Poli implications 39

SReseamh needs CC 8

References 8

2 Soil degradation and saio-cconomie conditions: sonssptx 33

ALL Soil degradation $

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page 3.3 Rainfall variability and slope 3.1.4 Surface erastal temperature 30 37 E13 National boundaries and socio-ssonamic Sa 31.6 The Ghana aguaculture geographical information syiem 57 7 342 Dan 32.1 Data clearinghouses 7 7 ằẨằẮ =8 38

322° Submational studies 5

32.3 Simulation models 9

4, Data iteration 41 Regression 6 6

42 —Intemolation 62

5, Suite analysis and presentation S.1_ Continent level analysis: AT a 3 Su.1 _Socio-economie effects on sol dogadation 63 5.1.2 Impact of sol degradation on welfare 68 5.2 County level analysis: Ghana ø if Goactastons pad decile for fare ee marth ỹ

ist of usoful We a 1

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4_Porcent change in terms of wade: fica 0

l5, Ghang poveny rate 8)

8 $._Wind and soil degradation a 9 Wing and sil degradation: closeup 85 10 Terms of trade and soil degradation $6 LU Soil degradation sử mẹ apll insone s 12 ieracy and decreases in per capita income 88 15, Sol degradation and decreases in per capita income: closeup 9 1A Miveracy and decreases ia per eapita incomes closeup sọ 15, Ghana: soit degradation (GLASOD) 91

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depradation The fst apes a qualitative approach white the second uses innovative quantitative methods involving the use of geographic information systems (GIS) data In both eases, the Focusison providing abet understanding of the incentives and constraints of poor fares in ‘making soil management decisions and he policy implications these ave for povery alleviation and improved environmental management,

“The is paper by Lipper stars witha bref intrduction tothe major issues of analysing natura ‘apital assets in an investment framework, followed bya discussion ofthe key determinants insestment behaviour and the ole of environmental externalities in investment analysis Men, ‘dete analysis of the costs associated with soil degradation from the Farmers’ porspeative is _siven, eluding the impels on average productivity andthe vatiance of agricultural yields, A description ofthe theoeccal and empirical Mterature on the investment constraints of poor farmers follows, together with an stays of the implications for sol investment behaviour “The paper conclads research hased opon information gaps identified throughout the paper One of the researeh witha discussion ofthe in areas dented isthe quantitative analysis Which the subject ofthe second paper presented in this volume f causal inks between poverty and soil degradation,

“The second paper by Osgood and Lipper focuses on methodological issues involved in ‘condueting quantitative analyses of caus telationships between poverty and soil degraation, “The two hey methodological issues addressed in the paper ae: () de problem of endogencity hoteeen dependent snd independent variables: and (i) the methods and implications of ‘combining spatially referenced GIS und socio-economic data in Sats analysis, Te paper presen the results of econometric analyses of poverty and soil degradation at national and Submtional levels for Arica and Gs,

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Le présent volume content deus documents gui analysen es relations entre la pauvreté et a «4ggradaion du so Tous doux vsent faire mieux compeendre Ie inetaions et Tes eontaintes que percoivent les agriculturs pausres qui doivent prendre des décisions en matiese <aménagement da so, et leurs repercussions générales sur la Tate conte ka pauseelé et Ia sestion ameliorée de Venviconnement Le premier document adopte une approche qualitative =Llesecond une mete quantitative novatrice comportant ulation des données des systemes {information weographique (SIG),

Le premicr document de Lipper souvre sur une brove inroduetion & analyse des biens «equipement turels dans un contexte d investissment, pus présente un debt ur les ements ‘determinants du comportement en matiére d'investissement et le role des facteurs ‘environnementaux dans analyse de Minvestissement H content une analyse déaillée da coat se ladeysadaton du sol du point de vue des agriculeurs,y compris incidence Iayenne et la variance des rendementsagricoles Il poursut par une description de ta su lapredutiviné ‘docamentation theriqu et empirigue su les conrnts de invesssement pourlesasiculteurs pases, accompagnée d'une analyse des repercussions sur le comportement des egriculteurs ‘enmatere dinvestissement dans le sol Le dacumentcoaelut par out! lahoration des politiques et un progeanime de rechorehe sé tle eunes en mate un debat su es conséquences ‘information ides tout au long du document Un des domaines de recherche identities ‘st analyse quantitative des liens de eats &elet entre I pauvreté et la degradation da sl, {quest le theme du deritme document de ce volume

Le denxitme document, par Osgoed et

sent ls analysesquantitatives des rappors de use i effet ene fa pause eta dégradation ‘sol Les deux questions mthodologiques essentielles tratées dans Te document sont les suivames: 1) le probleme de 'endogéndité entre les variahles dépendantes et indépondantes et 2ylesméthodes tes répercussions de "association des données SIG étérensées dans espace er des données socio ononiques dns smal statistique, Le document présente Tes sas ‘des analyses éeonométriques de kx pauveets et dela dégridation du sol aus niveau national et sulbational pour |’ Afri et le Ghana

Linger porte su les probibmes methodologiques que

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‘ue ol segundo utiliza métodos c4anttativs innovadores con el empleo de datos de sistemas de informacisa geogratica (SIG)

Elprimer documento, de Lipper comnienza con una breve introduccia al andtisis de los hienes {de capital natural en un encorna de inverssn, a a que sigue un examen de las determinants Fundamemttes del comportaiento de inversion y Ta funcién dela extemadades anbientales cen el anlisis dela inversion, Se ofrece un analisis detalado de los costo relacionados ddegtulacin de los suelos desde ot punto de vista de los agricultoes, incluyendo las com le consecuencias paral prsuctvidad media y la variacidn de fos rendimieatos agricolas Signe fina descrip de ln fiteratucaterica y empiica sobre ls hmitacones de inversion de los agricultores pobre, junto con us anlisis de las eonsecuencias pars el comportamiento de los Aagrieultoresen selaidn con Ia nversi en la mera de los sues, El documenta conclave con ‘un examen de as consecuencias para a elaboraeisn de polities v un programa de investigacion ‘hasado en fs agunas de informacion determina en todo ol docamento, Una de las esferas dd investigaidn que se determina es la del ans cuamitativn de los vinculos casiles entre lapobrera yl sola que esel objeto del segunda documento de ste volumen,

Er sepundo documento, de Osgood y Lipper se centr en cuestones metodotdgicas relacionadas con la realizaciĩn de snlsis cuantitativos de ls relaciones casales ene la pobreza y lt degradacidn de los suelos Las dos cuestiones metodologicas funcamentalestratades en cl documento son: 1 el problema de ia endogeneidad yy 2) los metodos y conseouencias de combina dates de SIG espacialmente referenciados ente variables dependienteseindopenietes,

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Lipper Resource Economist,

Economie and Social uN, Agricullure and Economic Development Analysis Division of the Food and Agticulture Organization of the United Nations

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For some regions (IFPRI, 2000) Yeta primary cause which results fro the farming ssstems chosen by the farmers Decisions such as where and of sil degradation i the depletion of soils when to produce, she types of techniques used — particulary in land preparation ~and the level and timing of inputs, al affect the biophysical quality ofthe sol, nd the extent 1 whieh iis ‘depleted, conserved or ygmented Ths although sociesy and farmers themselves may’ benefit {rom higher levels of soll quali, it has proven dificult to achieve the changes in farm ‘management practices necessary 0 reach ths goa This seeming contaiction raises ane of the key questions addressed in this paper: Hows do farmers ‘of the soil resources under their control? Wit incemtives are the) responding to, ad What make decisions about the management

‘costtaints do they encounter inthis process?

Although soil degradation generated by farmers of all income level, taking a closer look 2 poor produoets in particular is warranted because ofthe impact of poverty on farmers proxlition decisions, and because ofthe penal important ol of improved soit management in poveny alleviation, Agricultural praduction i the most important source of income 10 8 mijonty ofthe worl’s rural poor who currently aumber around 800 nillion, Through is ffeet on agricultural productivity the quality of their soil resources has a major impact om the ‘apueity of poor farmers achieve food security provement of sil resources thus in many ‘ces represents a important avenue for improving incomes among the world’s poorest inhabitants, However, the condition of poverty engenders a ditferent set of incentives and constraints in fermy of making the fasm production decisions necessary t0 attain such improvements, How the condition of poverty fs an impact on Farmers” soil management decisions then isthe second min question analysed in this paper

Understanding the incentives and constnts under whieh Farmers are operating in making their production decisions fs an inporaot requirement for formulating effective policies to Promate improved soil management, as wel as ther natural resources under farmers’ contra

The puper is onpanized as follows: in section 21a bret introduction wo Ue major isses oF analysing natural capita assets ina investment Iramework is given, followed hy discussion ‘ofthe Key determinants of investment behaviour andthe roe of environmental externalities investment analysis In section 2.2, a detaled analysis of the costs assozited with soil -deprulalio ann the variance of agricultural yids In section 3, de Key determinants of sol investment or the Farmers perspective is even, including the impacts on average productivity incentives and constrains amg poor farmers are examined In section 3.1 an analysis of ie slstrbution of natural capital endowments by wealth class is made followed by am assessment ‘of te importance of natal capital asses in general, and soi capital assets n parieular incomes of poor agricultural producers In section 3.2, the property rights regimes governing lờ the sceess to land fesourees among poor Farmers are assessed in th light oftheir impacts o8 investment behavioue In setion 33, the access of poor Famers to Financial capital and its influence on investment bekaviour through impacts on investment eaparty risk and insorance ‘capacity and discount rates is discussed I section 4 the analyses made i sections 2 and 3 are used ina discussion of the implications for policy-making for both improved environmental and poverty alleviation Insection Sue puper concludes with an agenda tor researl needs which were identified doughout the course ofthe analyses presented

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.,

2.1 Natural resources as capital asst in the investment portfolio

Capitals stock of real goods withthe potential to produce alow of enefits or uilites in the unre Hicks, 1939) Natural capital, then, isthe stock of goods derived dreetly from nature that have the potential fo consibute vo the long-term economic productivity and welfere of societies (Barbier, 1998) Includes raw materials such a5 timber, water an soi, as well as ccovironmental services such as waste assimilation and watershed maintenance {a addition, tual capital provides wiles through the provision of aesthetic and recreational services

As with financial capital natural capitals measure in stocks and lows although in physical rather dan monetary unis, Natural capital stock nd low values may be converte ‘nis with he application af resource prices othe physical quantities, although this exercise is to monetary ‘often problematic de to imperfections in resource markets that lead to distorted prices Adjustments o market prices to reflect the ive opportunity costs of exource use to society are therefore nezessary but dificult wo assess and often controversial

Natural capital stocks are commonly divided into renewable and exhaustible categories, “The former is defined as “a plant or animal population with the eapacity for reproduction and growth ata significant rate when viewed from man's economic time scale” (Conrad and Clark, 1996) These include fish populations, forests and, under cern circumstances, sil frit Such resources are capable af rogenerating themselves ~ as long 3 the envitonsvent in which they are mutured s Favourable (Dasgupta and Heal, 1979) Upsets in this murtring environment may lead to alos of regeneration capacity and thus the exhaustion ofthe resoutes Exhausibic resources on the ther hand, ae those which are limited in quantity and not proeibe in any ‘economically relevant ime frame (Fisher, 1981), Extraction of one wait ofthis resource resuls ina decrease inthe total stock ofthe resoure hy exactly the ste amount, Natural resources

‘that all ito this category include hydrocarbons, groundwater from aquifers and minerals

‘The cistintion is important, as t drives the “optimal” rate of investment, when viewed from the neo-classical economic point of view fn the case of exhaustible resources the Key Factors determining the optimal depletion pat are the cos of “harvesting” the resource ils Price and the discount rate, For renewable resources, the natural rate of regeneration enters into the calculation, Human intervention can change the natural rat of regeneration daroogh ‘capital investments augmenting the stocks, as well as tough depletion, which adds snother ‘dimension of complenity in determining economically optimal paters of use,

Economists have taditionlly approached the analysis of nual resource use ad allocation ‘overtime as an investment decision, However, in the application of capital investment analysis to systems tht include natural eaptal itis necessary to recognize that there are fundamental ‘ways im which natural capital difers from financial capital The fist is that natura capital provides services to humans (and other life forms) other than providing raw materials in the Procaction process Natural capital provides waste assimilation servis as well a8 other ‘scosystem functions which provide uilites such as rereation, health, cultural and aesthetic Services as well ws the maintenance of essential climatic and ecological eyeles and functions (Barbier, 1989; 1998) These additional functions of natural capital must be considered when assessing dhe use and savings of natural capital

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to one member ofthe community le to impacts taruighout the system, which in tu may impact the ability ofthe system t9 maintain its functions

Bcoxystems are charucterized by their degree of biological diversity and rstienee, The 0 are linked; higher levels of hidiversty generally ive rise 194 highor degre of resilience {Odio 1983; De Leo and Levin, 1997) Resilience is defined 3s"te ability of the ecosystem to maintain its characteristic patterns and rates of process in zesponse to the variability inherent in itselimate regimes (Walker 1992) The impacts of depleting one or more natural capital asses ‘om the various econystems in which itis embodied! vary trsmendously across resoarce and cSs0sydem types

By its very nature, the analysis of natural resource investinent and management eres a imertemporal dimension, as resource flows are dynamic Changes inthe stocks of renewable and non-renewable resources im the current tine period have implications for the future ows ‘ofthe resource, Thus the use of natural resources mst be considered petiods Fornon-senewable resources, cureat consunpion ofthe resource may reviltinhjghec as rade-o over time ‘marginal costs of extraction for fure users, ¢ depletion ofa groundwater aquifer resulting in higher pormping costs to future users ofthe well With non-renewable resnes, tracing the ‘changes in the sock ofthe esource over time is offen a simple matter of accounting for the amounts withdrawn or added to initial stocks However, with renewable esources, the tural regenerative process ofthe resource and its relationship with the inital stocks mast he considezed, as well a the harvest ates overtime (Taylor and Howit, 1993) In some cases this may be 2 gian change over time (ez fish population levels) while in others i maybe a quality change overtime esl fer)

Am aulitonal feature of natural capital thats eitical to consider in an investment analysis ‘isthe fat shat investment ate pana r emo ierversible Dixit and Pindyck, 1994), This ss tre of most capital investments: sunk eoss are generally zeievable However, nthe case of investment srateges involving natural capital «larger dimension is involved, du tothe conheddedness of natural capital within an evosysters, Changes in the Kvel of tural eapjal ‘Mocks ca rest in changes in entire eeoxystems and thas the ability to provide ecological services This is clearly the case withthe depletion of án ekhausiBle resource but may also ‘er with renewable resources, when the pattems of use exceed the capacity of the system 10 new iself-In such eases the resilience ofthe ecosystem is driven below a threshold resulig Ina major transformation ofthe system «andthe loss of some ots characterises and functions,

2.2 Incentives for investment

221 Time preferences and investment

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‘oonthodox economic theory, if farmers are “rational” e-g motivated by pat their decisions willbe based onan implicit or explicit ealeuasion and comparison ofthe expected stream of boenerits and costs associated with dhe activity aver ime, An important determinant of the decision will be the rate at which dhe decision-maker irdes off eurent for future consumption, forthe discount rae, If the discounted diflerence bebween costs and bereits, the Het presen value, of the investment being considered is positive then it should be undertaken

Even inthis eatively simple framework for analysing investment incentives there ate several complicated issuesto be resolved One key issue is how people's discount rates are determined sid the iniplictions ofthe ate for investment decisions related to natural capital use Another rigor ise s hos the presence of uncertainty ad risk affects the nsestnent decision, These issues are discussed belo

Discounting is the most common way in which econornists account For the sine dimension of investments, The discount rate i an indicator of te trade-off beaween present aod Fate ‘consumption Often the interest rate on capital is used as an inverse indicator ofthe discount rate, sit isa market-determined price forthe exchange of goods or services across ime The hoi of discount rate hasan important impact os the analysis af incentives for investment cause the costs an ben sd with management ae incurred a various points i time and the discount rate determines how this temporal disibation hasan impact on the desirability of the investment For example, a high discouat rate indicates preference for Preset over future consumption and thục disincentives to adopt management strategies thal result in delayed returns,

“The implications of how discount rates havea impact on incentives fo sustainable natural resource use ae quite controversial Some argue that because ofthe bias against investments vith delayed returns, high discount ates universally work against sustainable natural resource ‘management, an thus decision-makers with higher discount ates are more likely lobe engaged in environmentally degrading activities

[Norgaard and Howarth (1992) provide an intresting perspective onthe wationship bewwoen lscount rates and sustainable esource management First of al they point out data high ‘scout rate cowl elt in envizonaventally beneficial outcomes as they make capital investment projects which may have negative environmental impacts ~ such at dams ~ less atractive Secondly, they argue that the tansfer of resources to lature generations should righty be ‘considered as anequity issue, and not one of ficiency The discount rates way of determining ‘location ove ime, given he fact that goods and serices have w ime value With diem Given atime value of money that investors are faced with inerest Fateon capital itis appropriate 1a discount when looking atte efliiency of investments Fox tho eurrnt generations point of view This decisions fundamentally diferent trom a decision ‘on esourve allocations which s based upon equity considerations nhs ater ease, decision ‘maker may choose to hequeith resources to Faure generations in order 1 achieve desired evel of income oF natural resource distribution Norgaard and Howarth (1992) ditingust these two types of resource allocation decisions, but make an important link between allocations made between current and future generations based upon equity ‘considerations will change the efficiency prices which current generation investors face, The ‘desire to transfer assets to future generations based on equity eoidertion hasan impact on tho allocation of resoures over tm and, ths the investors’ discount eae ticles resour hawe

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‘which inavidvas ade off present and furore consumption is usually assumed to he ditlerent from that of groups ar society, so dhe discount rate applied under a jin iavestment scheme ‘may be gute different fom that of a private investor The institutional arangements under ‘which this type of collective investment is undertaken will also have a major impact om an individuals discount ee

221 Invesiment under uncertainty

“The presence of tsk has significant impact onthe choice of investment and natural resource ‘management strategies (Dinit and Pindyck, 1994: Dasgupta and Heal, 1979), Is necessary to ‘conser bot Ute natare ofthe risks encountered as well 3s te tite ofthe decision-makers towards risk and their capacity to insure against risks in order to capture the impacts on

mm

Risk arses from the presence of uncertainty and can be categorized by several differen features ther tregueney the intensity of the tmp they erate the degree to which Uy ste ‘xperenceson an nividual versus a collective esis andthe degre to which they are correlate ‘ver time (FAO, 2000) These ehanactersties are an important determinant of the ability of decision-makers to cope with Ask, either through ex-ante insurance sc

“consumpsion smoothing mechsnisins, Either ofthese may have sighificat ispactson investment ecisio-msking

cies, oF ex-post Producer” atiudes towaeds risk ad the degree to whic they are averse Io being exposed to risk have an impact om the types of investments they are willing to undertake, Results from theoretical andl empties studies indicate tht producers who are more risk averse wil allocate wo activities that ate les risky (e.g lower vatability of reins) but which have a

relurn (Roe and Grabam- Tomasi, 1986; Rosencweg and Binswanger, 193),

Risk aversion not only fects the compasiton of he portfolio of activites undertaken, but als the pret levels within activites Thooretialy sk averse priors may be expected ta prodce less when exposed tsk Sando, 1973), However the impacts of risk onesie decision-making eat he guile different if the consumption and procion decisions of the decision-maker are linked Many small-scale agsicuteral producers Producers of agricultural production, making the consumption and pnxdueion đẹc ion non are bot consumers and

Spa, Sadoutt and de Janvry (1995) note that risk-averse producers sy acl increase wexhtion ofa risky commedity ifthe ate net hayes ofthe commodity: Grepperud (19974) pons at thất i is necessary Ia Know how inputs afeet production tsk, al distinguish Fonction from starker uncertsines, in oder ta determine how sk will impact farmers soil management choices

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commie at every date, and in every posse sate, oF contingent commons (Aerow and Debyev, 1954), Lader such condicons the presence nagers could efficiently insure against it Since of risk would not affect investment decisions, a complete set of eontingent commodity ‘markets clearly does notexisand the ability of indvidaals wo insure against isk snot perfec risk preferences do enter into the investment decision Fisher 1981)

In adition to the issues rise ina standard investment analysis framework, the impact of lnreversiilty onthe incentives to make investments isan important aspect that needs to be considered in the context of natural resource management Frequently indeed usualy che potenal Future vale of holding a natural vesource stock i uncertain, especially i all ofthe services it does and may’ provide aze included into the calculation, The presence of this "uncertainty resus ina cost associated with ieveversible investments or depletions (e., negative investments) The combination of iereversbity of investment wi the uncerainy over the ‘value of future losses rests in an “option vale” of waiting for more compete information hefone any reversible ation is taken,

There are wo important asposts of ireveribilty that may bave an impact ona farmer's investment decision under conditions of uncertain the Fst ese, reversibility arises from ‘lack of investment or depletion ofthe resources, khích results in reversible loss, whieh can he tne for renewable resiuces ts wel as exhatstible ones In tis station, there isa value associated with investments that resultin the avoidance ofan ieversible loss (e.g-extinction), ‘vith the result that investments ate mote atratve to the decision-maker” Inthe second typ ‘oF example, the invesimeat represents & “sunk cost” which i ineversile om the Tare’ point of view’ he or she cannot recover dhe capital that went ino such an investment (Dixit ‘and Pind)e&, 1994), ln this situation, there is a positive value o wasting t accumeae more information before making such an investment purticulrly inthe case where liguidation of raductve asels sa form of insurance emplayed by the producer

‘The impact ofireversiility thus has two opposing effect on frmer’s investment incentives ‘on the one hana postive incentive to avoid ireversile los of natal capita sesvies, and on ‘the others negative incentive for an immediate commitment of seace investment capital that cannot be recovered The relative weight of these two effects wil depend othe extent to Which an ircetievabl loss of natural capital services is experienced 38a private cost to the Farmer rater than an externality (se section 3 for discussion on extermaites), andthe degree ‘whic the farmer prefers to keep liquid asels versus sunk capital asses

2.24 Externalities and investment incentives

_Many'of the impacts generated by the investment or disinvestment of farmmersin natural capital are realized i the form of extemaliis When an agricultural producer takes an action that ‘esuls in costs ¢benclits) that are bore by other an externality is generated, Examples include the siltation fof water sources from agricultural chemical runof the loss of biodiversity associated with of downstream waterways with eroded soils from upstream produces the polltion Jad clearing for uprcultre and the generation of greenhouse climasle change arising from the loss of biomass associated with some types of agricltural gases which contribute 0 global production, Extemaities can accur over hoth space and ime, ã, between current and fture enertions or between individuals and groups distributed over space,

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reliance on market forces will not yield an efficient allocation of resoures For this reason some xo intervention is required in ore wo eorect the market lailure and in order ret 4 more efficient allocation of resources Correcting the market failures associated with il result in an increase i social weifare a resoure investment and depletion he taken in accordance with the tue soil Values of the resources in question

decisions wil

‘Onco the primary reasons forthe generation of negative environmental extmlities throu agricultural production (and other sectors) is illdetined property fights to the resources oF ‘vironmental services, If property rights were wel defined and enforced, the owners would Ihave te incentive to make investments whose future values ean he Tn addition, the presence of a well-defined property rights structure crests the possibilty oF expected ta ecru tothe tiong owners g market for the gous, td thus an eficient allocation of resoutees ‘could be oblsined There are several reasons for the lack of a welluefined property regime wth regard to natural resources and envionment services, One main ssf that tis ote ificult to quan the resource, due 1 a lack of techoieal understanding of the good, as well asheterogeneity in the distribution ofthe esource over space and time [many cases, natural esoutces esquire collective ation among claimants under common pooper or private roperty resis, which is ificultoachieve due to high ransactons costs a socio-economic presses ‘tush as population growth and land use changes which efeate conlict rather than cooperation, In some eases, she environmental pon service in question has public goes nature, which meas that exclusion of aecess is not possible therehy reducing the incentives of any one

<laimant a invest in its provision,

From the pesspective of analysing investment chavious, the etic feature of all ypes of externalities generated through agyiculura production choices is that they do nút cMter the investment decision-making process ofthe produces However, tis als important 0 recognize ‘tha, in many eases, the same actions which generate negative environmental externalities alo sesultin some impacts the psncers thems and otis exten he costs will heconsidered Jn ineestment and production decision-making Assuring the producer isa prolit maximizes decisions on investing a depleting in natural capital wil then be guided hy thee enpact on the total profit making capacity of the prosicer fis therefore important to understand the relationship hetween narra capital and agricultural prodvtion outcomes noe to understand the rationale of producers" investment and production decisions

{Wiss important to understand that when market failures ate present, the production and Investment choices nade by farmers will no lead to socially optimal sllacation of natural Sagial and, in order to reach this goa, i ill be necessary for some sot of intervention, Ia recent years considerable interest hs hen aise in pogranimes a polices which wil provide incentives 40 agricultural producers to adopt pratioes which will generate local or global

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0

‘envizonmental benefits, One such example isthe Global Environment Facility which supports ‘rojets that poside incentives biodiversity protect vatersheds to agricularal proocers to ado land use practices that conserve and reduce greenhouse gas emissions The Clean Development Mechanism which is being negodated under the Kyoto Protocol isa potemial example of a market based mechanism for transfer payments to land users forthe adoption of practices ‘which generate carbon sequestration benefits Ona maxe local scale, power-generating FaiiGes may pay’ upsttean farmers to ape practices that reduce erosion, i onde to obtain higher

ngdeporwer generation capacity

“These tansfer mechanisms have a tremendaws capacity for generating both on-farm snd external production and envitonmental benefits, However, itis ertical to have a clear ‘understanding of de farm level perspective on the benefits provided by natural capital as well, asthe costs of inveslment an the various types of market nd non-market barriers that farmers ‘ace when contemplating investments in asturl resources in onles design fective sae « welfare of farmers as well as hers in fea global ar Future eommenities, for improving 23 Natural capi wcome and insurance services in agricultural production: farm level

For any agricultural produces, natural resources play Agneultural produetin is process ransforming natural resources inva fom tha is sale a key’ role ithe preiuetion proces to humankind though de application of lshour and capita inputs The tock oF nacural capital vailale tothe farmer at any one point in time will havea impat om the rae at which this transformation occurs e.g the productivity ofthe system Converse the mature of the es employed - including the investment decisions mae by the and sus future flows of natural capital

agricultural production practi

proce, has an impact on the stock of narra epi

ad agricultral prodction ouwcomes reliant upon such flows,

‘Natural capital ean ths he thought of as an inp to agricultural production, alongside the ‘more commonly thought of inputs such as labour, financial capital and technology (El Seta 199%), Elements of natural capital which are most relevant in the contest of agricul nsluelion inclod soÏl quality (slope texture, compton) climate (amount an timing of ‘intl, solar radiation, wind), water resources (availability quality) and land cover (amount and typeof vegetation)

In his seotion te analysis is focused onthe relationship between the management of so resousces and three key heneits which are devived from soil tural capita the level of productivity the stability of production and the ellcieney of iu use, Agrceltural production clv are one ofthe maj elenninanlx of rural incomes Prodction variance determines the ee of prediction isk proces fase, whichis also a eral determinant of consurmpsion levels well as investment strategies put eflicieny isan napostan determinant of production costs and dhs net recurs ppoiction While there are many other benefits which farmers ‘may’ consider in isking their soil mangement desiions,dhese thee aspeets ate the major determinants of the financial and risk henefits associa i ad thus fenompass 3 mor potion ofthe potential benefits om the Famers” perspective ‘with soit invest

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prediction These pacts are wanslte ino economic costs in the form of loss of income (or consumption), inereasedl income (or consumption) risk, and increased costs of production Several studies have heen conducted in an attempt 0 quamiiy thexe costs under varying ‘isumstances, Ther ests have indicated tht these can he quite substantial,

The impact of soil dearalaton on agricultural proutviy is dynamic process that is highly hetemgeneous across tne and spe In ation the impacts vary type of degradation: the impaet of soi erosion en agricultural vies is ifferet than that of salinization, The fc ‘hae sol degredation impacts are so highly ste atm specific sone reason tha itis ditcul tw assess the evant implications in a generalized fasion In adit, the fet that humans a satlaence both the occurence and impels of varius Forms of degradation also makes i Ufc to usses the economic implications of the process (Erensein, 1999),

To ilustrate she impact of land degradation on apsoutral yields, the ease of soil enosion can be taken, Soil erosion s caused by water and wind etion leading 0 oss of sol fom the uppermost nd layers Olden, Hakkeling an Sombrock 190) estimated that gpprleipslely $3 of the land degradation in developing counties is caused by water and wind induced soi rosin, Ezosion can result the physical deterioration ofthe sol andlor induce emia deficiencies and toxicities, which a wen impact agricultural erop yields (FAO, 19993)

‘Yad and Scherr (1995) summarize over 40 studies at global, regnl and Hac eae of analysis om the impacts of erosion on agricuural production, The estimates of impact a teponed in rms of yield decline 26 well as exon valucy, Yield detines ange tom 0.0 percent per anu 16 100 poreest Cg land goes out of prebiction) a tennis oF economic ‘costs, esinates range from USS26 000 millon nsualy ona global scale (UNEP 1991) 10 % 10 percemst of GNP for developing countries ansualy (Bishop and Allen 1989: Pearce and ‘Warlord, 1994), Ata faner level extinates of losses of between Otto § percent of agricultural _7085 product have been made (Bojo, 1991: Nogse and Saigal, 1992) Several ditferemt methodologies and assumptions are used in the calewlatin af both the vie and econasnic

impacts of degradation amone these sade, so their resis re not dtetly comparable

Ennitin and crediiliy

“The slalanshjp bateeen soil erosion and agricul yields can be divided ino wo Separate ‘components: the atest which erosion occurs overtime, eg, the susceptibility oF the soi {erosion as measie By tonnes of soil loss por eur, andthe relationship hetsigen the level of ‘erosion and productivity measured in tonnes of crop yield loss per unit erosion, The Fist sa Tunetin of to groups of factors: Forces that generate erosion al Fores that Fess ersten Lal, 1990, Forces ha generate eosion include climate and topegrapiy specifically the amount and distiution of rainfall and wind velocity andthe steepness and length of slope Collectively these ae referred (0 as the ezosivity of the soil (Lal, 1990), The forces dht resist erosion include the degree of land cover as well a5 several charatcristics of the soil ineludin (esture structure, water retention capacity an transmission puoperties (Lal, 1990}, T {ogee his latter group of charactersties may be referred toa th

‘esol (Lal, 1990; FAO, 19904)

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+1

In the topics there is some evidence that soil exhibit high rates o erosivity’ nd Tow rates ‘of erodibility (Frenstin, 1999), One major Factors that rainfall pater in the trpies tend to have shagpand intensive peaks in distribution tha is highly erosive (Lal, 1990) Tropical soils are generally considered less esilient ta cxosion, because they are mors highly weathered (Lal, 1984) For exanple Alfisos that are widespread in aid ad semi-arid teas of South Asia and sub-Saharan Africa have extremely poor soil structure an ate highly prone to accelerated erosion (Lal and Stewart, 1995) However Lal (1990) makes elear hat itis not possible ta leeneralize that inthe topics there isa higher rate of erosion occurring wver time than s the case in temperate regions

The negative relationship betwcen the level f erosion and impact on exp yieks is generally {40 he stonger inthe tropics than in temperate zones (Lal, 1987, 1990; Erensten, 1099), So erason uses mone severe quality changes tropical soils ducto thei ho inferent Fenty concentration of plant availae nutrient or organic mater inthe topmost layers ofthe Soil and subsoils unfavourable for edaphic lite forms and lacking effective oot volume Lal 1982) However, s Sanchez and Logan (1992) point out its important to disaperegate specie <lements of topic soil characterises in onder t illustrate te distribution oF sol chemical Properties relating to fragility’ deoughout the tropics rater tan simply assume apical soils

ae universally intense and Fai

Event of eosin Tipe degree to whith sol has area experienced hunnan-indece or natural degradation is larly a important determinant returns to reversing or continuing along the path of erosion’ (FAO, 1989 That is, ene neods of the curtea yield inact oF degradation, aswell as potential to know not only vhat the shape of the function napping erosion overtime looks ke, but at ‘which pot on the Iunetion the farmer earently finds himsll or hersell, There is ity high probability data land user will be operating on degraded land inthe Global Assessment of Soil Degradation study, Oldeman, Hakkeling 3nd Sombvoek 1990) found shat 28 pereent of all lands in ariclture, fof the GLASOD findings on land degradation is shown in Table pasture or forestey were degrade iol distribution tosome exten The 6

In Table 2 the degrec to which ewsion is Hecate Tague

of land degradation hy resion acconding 10 the 1990 Pereent land! degraded by region GLASOD estimates is shawn, together with the GLASOD estimates 1980

isibution of the severity hy tree categories These { Resion "on and -eWesoievare sumtewButaneedoalandted srecilealy - [ccrmmm—-L— to the economic costs associated with the level of [Re S9 m, =

degradation, For example, ightly degraded sis are [as ar those that experience only a small degree of [EU rxuctvity decrease and for ohh restoration to full [Seu AER 2 1 oe nee Aerie a

Productivity 3s possible through management

Inouifications (Oldeman, Hakkeling and Sombook, 000} In contrast, moderately degraded soils have greatly reduced productiviy, and require ‘major improvements beyond the nieans of local farmers i developing counties for estoration lo fil productivity (Olleman, Hakkeling and Sombeoek, 980)

‘What iscrtcal heres the depse to wih rosin his caused a derese inthe pth othe tp Laer f với and how diffrent and less poctve the uring lower ayers a,

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TABLE2

Distribution ond severity of sot degradation arising fom erosion by region

‘Region Percent soll degradation | Percentage breakdown of dagradaion trom erosion ‘on eroded lands by region severly Sava] Moderate Tah

ae BE zr 38 =

Bais as 13 48 30

[Souttrameza—[ sa ‘arial Ameren co a7 a8 cl 35 2 Ter Aerie rene i m 72 En 76 3 Tp 55

Đang —T a 1 a a

The cst of erosion oa farmer in terms of foregone output the, depend upon he Following four factors) the resilience ofthe soil: (i) the degre ili the degree to which erosion levels impact yields (the sensitivity): and (iv) the degree to of erosion risk present (e-theerosivity ‘which erosion and land degradation are already present In essence, one needs 10 know the shape ofthe functions relating yield 10 vel of erosion as wel as erosion aver time and the point at which the farmer or land user Finds himseltMerself on this latter curve, in ander to determine the costs of fand degradation and potential benefits from reversal to the farmes

Considerable esearch on the rate of erosion over time on varying soil types and under varying production conditions has been done In general, with no technological change itervening, he function is non-linear and eonves tothe origin: erosion increases over time at an inereasing rte (Lal 1987)

Relationship bowen erosion and yields

Research om the nature of the relationship between erosion levels and yields is less common, because of iffculty in measurement due tothe lage numberof variables involved as well 3s the imerations between them (Lal, 1990; Erenstein, 1999), Recent research by FAO (19993) has indicate tat fora wide variety of soil types there sa negative exponential, of logarithmic relationship between level of erosion and yields The implications ofthis Finding ae thatthe highest returns in terms of erop yields to reversing or decreasing soil erosion will he realized ‘on less-roded soils, This eationship was foun tobe fairly robust forthe humid nd subhuid ‘wopies but lsss0for semi-arid areas, where water availability becomes the main constraint to raductisity

In order to get a sense of how the resilience and sensitivity ofthe soil to erosion interact t0 impact farm level incentives and constraints im managing the land base, simple matrix as shown in Table 3 cam be used In addition to the two dimensions of resilience and sensitivity z time dimensions included in the impact assessment implications vary t diferent point estimates on the erosion and productivity functions in order to givea general sense of how the TABLES

‘Soll characteristics and erosion impacts on agricultural yields High esilence aw resiienee

igh senstivily | gh impacts short un zal; igh ipa n hort and long nối

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“

Estimates ‘Soltype and spe of annual sil losses (lonnesha} for ifferent sll, slopes and land cover Degre of and cover ‘Good [Typical cropping system witcat | — Bare so

ure sol 7-2 mn 2 lật

Fate Cambie (Sat 2 o =

‘ane Phasosem (1-22) 'ơthe Acoali.25) Bz tr HH Be ESi 1g

aap Hom FRO a) Forexample,

evidence of any yield-claed impacts if they ate at low levels of cumulative soi erosion lomever the impacts would be quite diferent further dow the ral of erosion on the same soils asthe euratativeinipaet ofthe erosion i finally manifested sa dramatic drop in yol

farmer with soils of tow rexlienee an low sensitivity may have ite or no

“The factors sepresented in cach ofthe squares ofthe matrix may be considered colloctively 2 the farmers curent endowment or sook of soil natural eapal Given this initial tack oF Soil natural capital, Farm management decisions ean have sn inapact on te Faure Hows oF the ‘pital by influencing both de rate of erosion over tne aa dhe yield impacts from a given level of erosion, For example adopting erp rotation o llage practices that keep soils covered ‘at times of high rill of wind occurence reduces the rue of erosion, Cultivating sloping Tans on a vertical rather than horizontal contour increases erosion ta Table 4 the Farm

‘mangenient decision of how much cover to maintain on the land an is impact on the so {erosion rates For varying sol lypes and slopes can clearly be seen, The degree of land cover ean bbedelermined by several dlfere management decisions inchalingerop choice e pores vers atnual), crop sequencing/rlations, or illage practice (e.g conservation lage VessuS conventional tillage),

‘Aside fom having impel onthe ae a whe eosionoecurs, farm management decisions «cn also influence how mech yield loss s experienced at varying levels of erosion Thiscan be ‘accomplished throug he wse of inputs hat deel tigate fr the impacts of erosion on erp productivity The farmer is essentially sbstituing some form of manufactured capital for she ‘tural capital ofthe sol although the degree to which subsituonisattainable is quite variable

rosin hasan impact om evap yields through changes in sol chemical charactesstics and ‘or changes in soil physica! or srstaral characteristics FAO, 19993; Ll, 1990) One of the ost widespread examples ofthe formers the los of sol nusients tough leaching associated ‘with erosion, The highest concenration of rtrents necessary fr plant growth is found i the uppermost ayers ofthe soil sa the loss of this layer results i decrease in sol muri reserve, The situation is even more serous on soils with low levels of natural frtity a the cease in much ofthe topics (Sanchez and Logan, 1992)

Erosionalso causes the loss of ule aye f organic material exposing wis to slusiniom toxiity and acidification sec ean cause adden and severe yield decreases (FAO, 19993; Lal, 1990), Through the moval of lay content and organic mater, erosion may result ina deeteased capacity ofthe sel to proside phosphorus in 2 form usable to plants (c

‘shosphorus Fixation) a terns of sructral npats, soil erosion can inctease te bulk density fol the soil making it more difficult for water peneteate to roving dep and for plant shoots ‘emerge either bythe removil or organic mater and colloids that create spaces Deieen Soi panicles or by exposing higily compacted subsurface layers (FAO, 19993),

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Are soils natural copital nd manfactared capital sabstitenes ov complements? Farmers can mitigate th chemical or physical consequences of erosion by substi

serviges lost through the emsion process of corecting forthe chemical and physic! constrains eosin leas to, The application of fetlizrs to eep

esaniple of substitution, Comecting acidity though the adiion of lime isan example of a for the

ens Tost nutrients isthe most common However, sil natural capital provides a wide aray of services in conjunction with othr ‘components ofthe ecosssterns iti embedded witht, so even if substitution for one aspect of the services provided by sol eat stainable, there may sill he adecresse i er ecosystem services The decline in these link services may result ina destease inthe prslactsity of TRanhla:ture inpols, withthe result that under some circumstances, soil natal capital and human applied manutactured capital are complements rather thin subtitaes’, In te ease of chemical fonlizers, for example, the loss of soil quality through degradation processes may result nadctne it the yield response to chemical Fertilizers, eg, the marpnal preductisty of ‘enviealferiliger declines with declining soi tural capita

The question ofthe exten co wich manutactred forms of capital can substitute For natural capital s quite controversial an ies atthe heart of the dsbate on sustainable

‘management, Weak sustainability is deined as the maintenance ofan aggregate level of the ‘pital tock, be it compose of natural or human-made capital contrast, song sustains Fequies the mainienanceof natural capital stock Erensten, 1999), Thediference between the ‘so positions is essentially a difference in the assumption of substitulablity Between natural and manufactured forms of capital Proponents of weak sustainability assume a ‘while Mose of strong vai think of natural and manuactured capital as complements resource Whether of not soil natural capital and manufactured capital are substiues or complements is artical determinant ofthe impacts of sol erosion on productivity and tas Far devision- raking, Fssentaly, if hey ate complements then th lass af sol anual capital is higher becatse it resus i both loss in produotvity directly associated with is own Tos, a8 wel 8 8 decrease in productivity in manafsetured inputs Desiving pameters that describe under ‘whic conditions natural cupital and manatactured capil are subsites or complements sah limportant area tor future esearch, tn several gvonomie models of optimal soil management the resus ae dependent spon the critical assumption of complementarity hetcen natural and manufactured inputs Goet 1997) onstroted a dynamic model of sol management in which he distinguished Betveen the case of sil depth und fertlizer as substitutes and one as complements He hypothesized thatthe wo

‘would be complements aloe levels of soil depth where depth isthe Hniting factor, Wot sulbstitte thigh levels of soil depth de oa lower marginal accretion i te yield as the so increases, The resus of his analysis nacate that which ofthese cases holds Gue i a etic determinant of the ste tate sol stock, aswell as the inipact of changes in erop prices or the discount rate on the optinal evel ef soil depth In his dynamic models of epuimal sei management, Clarke (1992) assumes tha sil natural capita an manofictared inBat are ‘complements but notes at “the relationship between commodity price changes and viable sei ‘conservatin strategies depends crucially the complementarity substitutability reatonships

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6

betycen the inputs” LaFrance (1992) and Barbier (1998) assume a complementary relationship between sil sock and cultivation and Grepperud (19976) side-steps the question by defining the inputs to the praduction function in relation to thet impact on soil quality oreosion, ater than including an explicit tem for soil natueal capital inthe peoduction Function

nan empirical study, Walker and Young (1986) found that, with feriizer inputs, higher 3ields were obtained on fields with lower levels of erosion indicating & complementary relationship besween soil natural capital and chemical fenlizer They analysed the impact of ‘resion on crop yields in the Palouse are in Mao and Washington States inthe United Sites that had experienced both high rates of erosion and increasing yields” The authors concluded thatthe complementary eatioship between inputs ishighes in situations where unfavourable subsoils underlie topsoil horizons A greater degree of substitution would be found between chemical fertilizers and eroded soils in cases where a greater degree of homogeneity exists between surface and subsoil quality

Since technological change ise is a complement to soil natural capital, any assessment of the impacts of soil quality decline must consider the difference between yields obtainable Under the new technology with and without the presence of erosion, eater than yields hefore and after the adoption of the technology, whic i often the case among farmers Acconing to ‘he authors ofthe study, soil conservation practices were not widely adopted inthe area because ofthe producer's belief that yeld-eahaneing techuology compensated for lost topsoil

2.3.2 Impact of erosion om crop yield variability

Another major concern of farmers isthe variability of crop yieus over ime Yield Muewwations arse primarily de to climatic factors or pest and disease incidence Fluctuations in yields ‘realeprtion risk, which generates cost isk averse farmers seching to insure themselves, ‘The absence of facilities 1 sone produce overtime, together with poor market development and low incomes, means that farmers are often directly dependent onthe current year's harvest, forth fox supply Variations and therefore yield variability emers peaduction decision-making asa source of risk, in some n gic can have quite dite consequences for ral populations

cases quite intensely

‘One of the biggest sources of variability in yields Is uncertain eanfl The inability of crops to obiain sufficient water during eritiea periods in the growth process results in significantly lowered or no yields at all much ofthe world, most farmers ae dependent ot rainfall for their source of erop water, Water is made available to plans thrash transport ‘hough the soil medium ito the plan roots, The capacity ofthe soi to store water that can Be sade available tothe plat oxer the growing season is hus a important feature for mitigating luncerain rainfal pactesns This eapacty known asthe soil water holding eapacty (WHC) ‘Under undegraded conditions soils vary naturally in teir WHC, wi Reaver soils with higher clay content exhibiting higher levels generally than lighter, sandy soils,

‘The pracess of degradation can reduce the soils’ WHC The loss of soil wopsail ayers {rough erosion may have a negative impact on sil moisture retention capacity and increased infitzation rates Bishop and Allen, 1989) Colacio, Osborn and AK (1989) state that soil

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erosion may ineease the variability of prouetion regardless of is effect on average yield ‘Moyo (1998) found tha soil erosion in Zimbabwe resulted i reduced soil organic matter and lay content, which caused drop in Fetliy an increase in bulk density and a redoced storage

capacity of plant available wate particularly with the sandy soils in Zimbabwe's communal areas His research was cartied out in the semi-arid region of southern Zirsbabsse tht is characterized by erratic and unrligle rainfall between and within season The resuls indicated that here were no significant yield dtfeencesin conditions yiets varied signticanry with plots teated with mulch fpping showing much years of high rainfall, but under poor aiafall,

higher gies in the pwr rainfall year (Moyo, 19981

what extent can farmers substitute manufactured inputs to substitute forthe lost services| ofthe soi in terms of ye variability’? Inthe case of esinfall uncertainty, one obvious measure {that could he taken is the supply of iigation water to substitute for fost water availability in ‘the wil, However a inthe ease of declining aver yield level, neasuzes inthe presence of continuing sil degradation results in a decreased productivity of te adoption of such mitigating snnigation water—for example, soil quality and isigation are complements UUnder degradation that leads to deereased infiltration rate and lower moistre retention rales, rather han substitutes higher and more frequent irsgation rtes are required to obtain a given level of water delivery toa plan Under degradation, irigaton eliiencies e the degree of water wed by the plant divide by the total amount of water applied) decline, thus the cos of igaion are highec the fixed capita cows of constructing and maintaining an zalo system are considered as ‘well the variable ‘substitute for services lost through sil degradation are even lower, cost of dsivering the water each season, the cctums to using iigation as

‘The implication of these Fnngs is thatthe cost of soil degradation to farmers is higher than jus loss in average yields, particularly in rainfed areas tat experience uncertain eainfall patterns Unde these cocditions, vestments in sol conservation which result in reduced yield ‘arabiiy may be quite auracive to farmers, even if they do not inerease average yields The sritiea determinants ofthe decision o adopt soil conservation measures inthis ease are the Aegroe of exposure to risk arising from the degradation ad he farmers atiude towards risk ‘on the one hand, as well 3s the relative costs and getumns to sel conservation and technologies which mitigate the impacts of yield variability

23.3 Cost of soil conserving and mitigating inputs

{nse previous two seetions the major impacts of sil degradation, as specifically erosion, 09 Farm production costs andthe sesegies whieh the Farmer can sop to addeess these were ‘outlined Beoaly, farmers ca opt for one of four strategies: i) do nothings (i take measures to sow the rate of erosion: ii fake mesures to mitigate the negalive impacts of erosion on ‘crop yields and varabiiys and Civ) alopt a combination of (i) and (if) The strategy the farmer adopts wil deperd on the magnitude and typeof costs associated with degradation and how these compare with the costs associated with adopting anyone ofthese four strategies, I isto th analysis ofthese later costs that this section i devoted

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the adoption of any farm management ste it is essential to consider the gi fnaneial implications associated with any course of action: owever inorder t havea fll understanding ‘ofthe incentives and constraints of the farmer in making investment decisions on sol natural ital Lis necessary to consider other non-financial costs as ell

“Taking each of the key factors of proction in turn, 2 broad description of the ips of ‘opportunity costs associated with each, i they were ta be employed in any ome of the four strategies ound above, ean be outline For example nthe case the first strategy tothe farmer of doing nothing in the face of soil degradation associated with erosion ste loss the cost ‘of production valve associated with the degradation ~ the loss of yields, spur efficiency oF ‘top yield stability which is due tothe degradation As described in the previo section, the ‘magnitude ofthis fos will vary considerably depending onthe rte of erosion he ee of yield Joss or stability loss associated with erosion, an the eure evel of erosion In some cases this Toss may be rather smal, an fess than the costs to the Farmer of adopting any measures reverse the process in which ease the farmer has a9 ineative io take any action; the opportunity cost ofthe foregone production i ess an the cost of preventing ts loss

[Now take the case where erosion does result in substantial production costs an assume that tbe costs associated with slowing or reversing the erosion process ate Tes tan the foregone production losses Ostensibly’ the farmer has a financial tneemtive 0 sdopterasion contra However, ithe eresion contol measure involves the use of investment nds inthe curent time frame in order to achieve 4 postive fmpact on provision in a future tne Fra, the farmers essentially giving up the use ofthis capital inthe present — foregoing the cureat use ofespiul,The way in which this trade-oT of eurgent capital for fuure capital is viewed depends ‘onthe discount rate ofthe farmer, as well asthe expected future payolt high discount ate ‘which implies that current consumption is weighted more heavily than fuze consumption ‘wll result ina high opportunity cost of investment funds wo the farmer

Another type of opportunity cost that a fied capital investment foe erosion control might Jnvolveisthatof insurance capacity By making an iveversibl” capital investment inerosion control, the liquidity ofthe asset pontoio ofthe farmer is lowered To the extent that asset iquidity serves as an insurance mectianism tha allows for rapid aevess to funds the ease of shocks tying up funds in an quid investment implies foregoing a insurance benefit

The opportunity costs associate with labour are lo acridcal determinant of farmers" sei rmanagenient strategies Adopting erosion contol or mitigation measures may require more Taour, 3 more arduous typeof labour, oF labour requirement ata specifi seasonal time ka adopting such & measure the fms may be giving up the opportunity © work of-arm ~ and thas the wages associated sith such employment Alternatively the farmer may be foregoing leisure, or les physically demanding types of labour’ or the ability to work on ether erp tivities on farm, Any of these may’ const a significant cost vo the Farmer, nổ thas 3 disincentive to adopt the strategy in question Under these conditions, farmers are unlikely to invest ta socially optimal level ia avouding soil erosion

Enmpircal leranre on adoprion

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foregone! One important example in this category isthe use of exop residues as & mechanism

for rene lucing grouneover, Cop

residues may he use for livestock feel or fuel purposes: however, in tis cane te loss of these uses constitutes significant opportunity cost tothe farms particularly where alternative sonces ‘of fel a food ae sees an expensive

Given this framework for assessing the costs associated with the varios options For soil Ianagement an assessment can be made of tae empirical Iiterature on experiences with the adoption of sil erosion and mitigation practices on fem Traditionally measures designed to {decrease soil erosion, have been primarily Focused o9 enginestins proaches, for example the ‘consriction of physical harriers such terraces or bus to impede the movement of the soi Such measures fen o require & large fixed capital investment andor « high inpet of labour “Te impacts of hones of these hati lime fs alton, in many cases te adoption of sec technologies leads vo a decrease in erp ied only after a substantial length of ‘ouput, doe 0 a ss of area in practi, The combination of high xed cost up from and delayed and reduced bench ke this sor of investment anatractive i many eases to Famers, fend to hes `

La, Pgiola and Reiehe (1994) reviewed cos benefit analyses For ine soil conservation projects in Central America aa nal tha the highest economic

the low cost and quick feturing ones, in areas where erosion Bad appresiahe Hexpacts 08 Productivity In ane case the adoption of soil conservation led oa ecTne i ong term rewens to agriculture, due othe fss of land in prodiution vo diversion ditches andthe linited impacts ‘of erosion on productivity Barbier (1998) found that the high labour cos or the construction ff bench teraces 10 stop erosion in the uplands of Java made the aption ofthis measure tmatzactive to farmers, This implied 3 loss of Foregone income fem the labour that could be

‘sein alternative income-zeneraton acts, as well a a loss of land for production

| Honduras, Carcamo (1994) distinguished hetieen the on-farm versus external engfil of adapting vious measures that impact soil degradation ates, growing Various crops ‘vith varying land cover services, the we of alternative lle practices and the constuction at soil erosion contol devices Tey coneluded that in are achieve socially aptinal levels of soil degradation both a redueton i Larner income an an increase inthe degree of production Fisk he larmerisexpased to Farmers in onder to achieve the desired level of degradation come to wil occur which implies anos or subsidies or transer payments

Hwang ea, (1994) conducted research on Farmer incentives for erosion contol nong small-holders on steeply sloping lands m the Dominican Republic and found that large-seale eduction in soil oss ean only he achiev atthe exponse of significant declines arm income yen where sol erosion contol measures result in inereased production the impact of erosion <cnizolaaption on proton risk may make then unatractive vo farmers (Day ef a, 1992; Grepperud 1997s)

‘Move recently tention has hecome focused on biological measures of sil erosion contro suc as cover crops and mulching The attractiveness of these measines as compared with ‘engineering appnoaches are ä lo nial invest rguinemben, less loss of eropping ate, and the realization of benefits other than just erosion contol suchas fruity enhancement Soil sacs imiprovenent and weed conitol, However they to involve eoss fo the Farmee

Erenstein (1999) gives great detail onthe cons whit may be involved with the adoption of top reside mulching over conventional system, including increased seoding.lelization and weeding costs loses in input productivity and loss of hvestoek grazing He also makes the Point that ¥en in cases when adoption of« mulching technology results inn overall redaction

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20

inlabour sequitement, the timing ofthe labour input may sift and confit with other atviies and therefore not bea viable option foe farmers (renstein, 1999: FAO, 1999)

“The costs of adopting substitution and correction approacis lo erosionnduced pretutiity loss ate hose of taining and applying the inpats In general these types of measures tend 9 fall imo the category of operating ralier than fixed costs — eg they occur on an annual or seasonal bass and thir impacts are generally realized within the same production cycle For this reason, as wells their generally lower cost a percentage of overall prection costs, ‘mitigation measures are often more attractive to farmers than erosion contol nleasutes, They 4 not involve high rate of foregone eureent use of capital, they allow some Debit ia terms of ability torespondto shocks, and they exhibit short-term and visible results The problem is, of course, thatthe effectiveness of mitigation stategies will decline with increasing soil erosion, although this is not always yecognizedby the farmer, The example described i section 2 of the farmers in the Palouse area of Lah is one istration of this situation Although high rates of erosion were experienced, increasing viel associated with ferilizr inputs masked the problem from the farmers" perspective and made the adoption of erosion contol practices seom unnecessary Here the ue costs a erosion 1 the farmers was the foregone production and ferilizer efficiency they could have obained with dereased erosion, however ether these ‘costs wore Tess than the costs of controling the erosion othe Farmers were unaware Of the Joss they were aceniing and therefore no ervsion contol was adopted,

“This leads us 1a final consideration inthe analysis of Farmers” sil investment incentives the degree to which the costs of disinvestment oF depletion are recognized as such by the famier Obviously, where no cost is recognized, there wil be no incentive to lake action, Particularly in cases where erosion results in slowly accumulating impact, which only ater ‘some continued stress reaches a critical thresbold at which significant production impacts are realized, iti difficult for farmers’ to perceive the benetits of erosion control investments, ‘Unfortunately, in many sch eases reaching such cttial threshold implies reversible damage tr prohibitively high coss to reverse the process In such eases, educational efforts among the farmers onthe potential npaet of their ations midy be necessity

24° Conclusions

[Natwal capital in general, and soil natural capital specially, play erica roe in providing farm income through agricultoral production, as well as insurance services by reducing production variability, Farmers have an itil endowment of natal capital, Which ineludes the degree to which the resoures ae resilient to degradation processes, the Jegre to which they are expose to natural processes hat case degradation a he dagtee 0 whieh the resource has already experienced some level of dezradation The level of natural capital endowment is lone of the major determinants of the costs of degradation on-farm, and thas the resource ‘management decisions that farmers make Aside from the costs expenienced by farmers, the degraton of natural capital assets may result in exteral costs, which ae bore by others a ‘4 Watershed, regional or global scale of impact, or by future generations Although these costs ‘ean be quite substantial and in some cases reversible they do 20% ener into the đạc don

making calculations ofthe Farmers, whe ate assumed to make d

solely based upon te imps felt on-farm, given the canstrsints they ste operating under,

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‘more ofthe services provided by natural capital but since natura capital provides wide array of ime linked services the substitution between natural and runufoctured forms of capital i often ited instead natural capital and manulactred capital are ten complements so that the loss oF natural capital results a decine i he to agrieulueal prodction effectiveness of manufactured capital pats

Bue othe time requirements for natural capital regeneration investments in the reversal or decease of natal capital depleon offen exhiit delayed returns nthe eae of so, aiionat ‘measures to reverse degradation have required large Fixed capital investments for engineering boss solutions In adition, such measres often resulted in lower fre production levels die toa loss of land under production In contrast milgation measures are often experienced ts ‘operating cons, which require a lower level of investment ona moe Ireguent basis, and hose resulls ae often more readily realized than in dhe case of natural capital investments More eater tention has bees focused on biological forms of soil degradation contol, which sequite less fixed capital outlay and whieh may exhibit a shorter ten around Hime for resels However, even these measures may result i higher on-farm costs in terms of Foxe one proxhiction, loss of alternative sources of labour income, livestock feed or fuel soures, sd Feduced input productivity

‘The inital endowment of natural capital i a key determinant of the on-farm losses in ‘raductivity and increased yield variance asweiated with continued degradation, as well a the ‘eum to investment in eeversal or mitigation in terms of erop ourput The eatve prices of {conservation and mitigation measures, as compared with the vale of proiiction obained are also fitical factor, Finally, the ease of yield variability, he farmers atu towards risk is critical determinant ofthe opsimal natural resource management strategy These ae tho sss ‘hat ase covered i the following soetion ofthe paper

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3 THE INOTSIMENT PROFILE OF POOH AGRICELTERAL PRODLCERS

‘This section gives an analysis ofthe characterises of poor agricultural producers in the comext, oftheir role as managers of natural eapital assets, analysing the impacts of poverty on the preferences and consrants of farmers related to investnient decisions The analysis includes an ancessment of the differences beter the investment resources of poor agriculturl producers 88 compared withthe non-poor, 48 well ofthe differences in ainids oF preferences among ‘oor aurculral producers that might affect investment decisions, Together, these make up a0

profile” of poor agricultural producers

In order to begin this profile its necessary to deseribe i greater detail what is meant hy the ‘erm “poor agricultural producer” Agricultural producers may be owners or tenants Landless ‘agricultural wage labourers are not considered, eventhough they ae often aman the poorest rural households, because they in general da not make decisions regarding the management of the natural resources they work on Poverty has been defined in many diferent ways, using traditional indicators based on inconte of consumption, as well as indicators based on social factors such as health, education, polieal paniipation or isolation For the purposes ofthis per no specie definition is opted, us much of de discussion i Based on a wide cange of studies that use varying poverty indicators

‘The concept of poverty that wideris the analysis in this paper is based upon an assessment tthe aset holdings of Ua household acconding tthe following categories: i) natural capita: (i fnaneiadmanufactured employed by members ofthe farm houschold,togeber with tei labour o generate flows of capital (i) social capial and (iv) human capital These assets re

‘wealth or income Taek af assets in one oF more af these categories resus in an inability to generate an income stream suicint to moet hoth consumption needs and the capacity to make vestments necessary to attains sustsinable increase in income over tims, Here, poverty takes ‘ona somewhat broader definition than is often the cas, in dati includes an incapacity to rake investments which may improve future welfare, ay well ss the incapacity 0 meet 3 ‘ininium level of welfare in the current perio (Reardon an Vost, 1997) Te focus inthis paper iso hows various manifestations of poverty have an impact onthe investment capacity Df the household, particularly with respect to thei soil resources,

3.1 Natural capital endowments and the ineidence of poverty

BA Productivity enhancing natural capital endowment and the incidence of poverty ow does the endowment of natural capital among poor farmers compare with that oF the relatively wealthier? In this section the prime concern is with analysing the differen

quality of biophysical environment under which poor and non-poor farmers operate The “implcsionsin terms of iavestnent incentives are whether poor producers havea systematically Jower reum to investments in natural capital because of the quality f their endownvent CObsiousy dhe quantity of land will bean important determinant ofthis investment capity 38 ‘well an the lick of access to land among poor agricultural producers is well documented Indeed acces o land soften considered tobe the mst significant determinant of rural poverty: However in this analysis, tis interesting to expand the discussion to include considerations of and quality Tats, aside from having less land, do poor farmers have poorer quality and, or land Hocated in anes of less agrotinatic production poten ad, ifs, how does this affect thir incentives an capacity to make investments?

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itis not clear what they aise Irom: are people poor hecause the resource bases poor, oF the resource hase depleted because poor people have degraded it? The siution is even more lmbiguous if migration and the dynamic nature of resource degradation ate taken into consideration, eg poorer populations may move into areas which have heen depraded by

‘wealthier infabitans who have since moved on

The have been several sides ging frm the macro to micro level investigating links among natural rescurse endowment, poverly and environmental degradation In some cises the studies were focused solely on finding cotelations while ethers on causality In some studies strictly exogedous features of natural eapital endowments ate considered i elation the incidence of poverty, while in oer eases agricultural praductivity which includes Factors endogenous to the incidence of poverty have been considered With this later {9pe of ‘nvesigiion i is difficult o sot ot causal relationships:

Scale and heterogenity are wo ater rica issues that must he considered when analysing the spatial coreations among variables, The variations aver space m soil quality al rainfall distribution ae ditisent, with oil quality gencrally showing higher variability within a given land area The spatial distribution of rural poverty can also be quite fetetgencous; in sone cases income levels can sary quite substantially within vil

levels may show more significant variation benwoen villages or even lrg administrative nits such as counties or provinces, Thus the scale at which data ate gathered has eonsiderable ‘nnplications forthe typeof effect una can he ellectively measored

Inthe remainder ofthis secHon a series of articles on correlations and eausl Tinks between poverty and natura capital entowments is teviewed The festures of natural eaptal of primary Imerst here ave those related to climate and sol, 28 these have the srestestimpications for grcultoal pution ad variability Fis, stdies focused on exogenous climate erdowmens tnd the dsibution of poverty are looked a, followed by studies focused on lanl an soil Fesourees and poverty of mone miceo scale of analysis"

‘Boca and Oram (1991} lose atthe distribution of povery across the PAO agro-ecological zones, using caloric consumplion (or food expenditure equivalent to meet ä nam, ‘consumption standard) as the indicator of poverty Poverty data were taken froma wide ‘of sources incliadng income and consumption sur and surveys done under various esearch

the correlation between poverty and natural resource endowments FAO, 1978: 1996) The

‘wolicl ones were deste fo for evating the stato lands or yas yp ok -9BSMlurl pewMeelon, Tục „vơ ne defined by ei ys, anal ptr, soe aa aad

al an ltl AFZ sts so aaae dive rm the FAO hz si tap the word wih naa sent [5000 UU, Climate vatiables are based upon interpolation ‘eather tation daa: dhe global ABZ stay climatic dsl wih a reson of 30 arenes (2-300 kn ae equstor suse and digital maps ate oda with ae tr onder to dense ones of homogenous acuta produc putea based her tral endearment 6 elas ‘Specifie top production egoremens {FAO 1078, FAOMASA, 2000,

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projets, The sale of poverty data inthe sty is thus quite wasable, From the micno np to the national level

Two messures of poverty incidence wore considered ove the agro-ovological zones (ithe ‘ota numberof poor people: ad (the pereetage share of the population nthe zone that Was poor Tir resuls indicted that he highest numbers ofthe poor are located in ail zones and the least aumbers in wet zones The highest share ofthe poo in the population wa four in seasonally dry zones These zones are somewhat tlated wo agricultural productivity i that the length of growing period for crops varies (rom yeut-sound for wet zones to under 80 ds for highly and zones However erga atea was nol accounted for in the agro-cological zones available at that time, and exogenous factors such as soil ype and topography ean have ã significant impact on agriculturat productivity within climate zones, so a ditect link among resource enndosment, agricultural produetivity and poverty coud sconclsions, ao be msde fom his study's

Sharma et a (1996) use ats of child malnutrition asa poverty indicator and calculated ‘hie distribution over the FAO agre-ecolagical zones They found that globally 58.5 percent of malnourished children in developing counties relocated in the warm topes, 26.8 percent in ‘the warm subtopics aad 147 pereentin the cool topics and subleopics, Tey did not fad a clear link between child malnutrition and agricultural productivity, however: high eates of malnutiion were foun in areas of both high and low productivity

| 1997, GRID-Arendal conducted study om the relationship between rural poverty and land use potential im West Africa, using geographical information systems (GIS) technology Poverty sas rneasured using indisarors frm the Human Development Index” developed by UNDP, which were oserlad with measures of she “marginalty” of lands including both biophysical fagroclimatic zones level of land degradation and socio-economic (population density and acessibiliy to infrastructure and roads) They ound weak correlation between thee povery indicators and degree of arity, no significant correlations between poverty {ndistors a land degradation, ad a weak negative correlation between child mortally and sgcessbility

Kelley ad Ra (1995) looked atthe distribution of poverty aid marginal environments in India using state evel data and by wsng average crop output values tn dstine marginal They found no relationship between poverty and marginal envionment, using bal total numbers and share of poor inthe popslation 2s dependent variables Fan snd Hazell 1999) also found ‘no wationship between poverty and marginal environments in India, using agro-eological data together with sural poverty data derived from sample surveys of consumer expendi, ‘These were redistributed over ageo-ecologeal zones through the use of population Weights In this study, both reas of high agricultural potential thas inthe rainfed low potential areas a higher concentzation and higher numbers of sural poor were found in rained

* Including ehitd moni, ada female Hers primary school eee stunted owen ates and eile with © Their ola deratation Aswclimatic ones were definl hase upon te rato of mean annual precipitation to potential was ten fom the GLASOD database tathasascaeo 1 00 08,

apnthgintioi am simulations deri tse ofS decimal degrees a the equ) Peover data were ake fo sample surveys aggregated to saci lve

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Based onthe evidence From thse stuies yppears that papulaionsHoeated in ares o ard <limates may be more saseepible to poveri but intervening factors sch as investments in inigation development can mitigate this relationship, so thal noelear cut comlation between <limtic endowments and poveny can he found Tis paper, however focuses on soil endowments andthe uistribution of poverty and moves on toa reve af studies that have focused specifically ‘om tis aspect of natura capital endowment an poverty

In an evaluation ofthe CGIAR research priority setting, Nelson etal (PAO, 1997) found that the biophysical characteristics of production settings Was not a suliient criterion om its ‘vin fr setting esearch prions fora poverty alleviation stategy They developed an indicator ‘of eavonmental endowmenrs with wa values: Favoured kinds and marginal Kad, Magia lands sere dafined as those in which the absence of esteral inputs had ested in Bevel ato ‘exceeding the threshold limits 10 the enhancement of agricultural performance, Favoured agricultural lands were defined as rainfed or ierigated las wich are fertile, well-drained ‘with even topography and generally under fury intensive agricultural use." They found nơ correlation between the incidence of rurel poverty andthe disiibution of land quit eins ‘thom toreject the hypothesis tha thee exists a spatial correlation between poverty anda strictly biophysically defined measure of environmental fragility

Kinschke Morgenroth and Franke (1999) tested the eausil relationship between poverty and soil degradation wsing @ national level pane dataset cowering the period from 1960t0 190 toe 73 counties, Using the GIS-hased GLLASOD dataset on human-induced sol degradation asthe dependent variable they explored the explanatory power of ase of variables representing ‘socio-economic an technological conditions As indicators of poverty they used # wide se of ‘ariables, chiding the averge calorie supply per capita, the average percent added Value in sgvieultral proaution per capa the density of tactrs por hestare an the groih eate of sald value ia dhe agricultural sector, None of these variables were found tobe significant explanatory variables in the regressions leading the authors eect the hyphens thal poxersy is cause of soi degradation

Aigher degree of comlation sound in miro evel stdes poverty and so endowsments however although exceptions exist at this sale of analysis aswell, For example, Ravenbory ot 21 1999 used housebold survey data from thee watersheds in Honors and found strong ink between soil quality and paver, They found that between 25 10-44 percent of the poorest households had their most itoportant load plots on soils elasiied as the worst quali , shallow steeply sloping and highly erosive Only ¥ to 18 persent ofthe leastpoor households reported plots on this quality of land (Ravenborg 1999),

Shepherd and Soule (1998) conducted simalatons of Ue impact of sl ety endowments fo farm income, hased on farm mode! typologies parameterized with household daa fom ‘West Kenya, Thee results indicated hat farms with ower inital endossmen of oi te would experience declining yiekls and profits, caused by an inability to replenish nursiens mined over time, In thie simulation results, farmers with low aad mediuin natural resource endowments ha only 7 to 13% ofthe far income of farmers with high resource endowments However, De Jager et a (19981 conducted an empirical analysis of 26 households located in

The zones were hase upon dt rom the FAO dig oi map othe world very sme were deve fons UNDP dts othe sre of poverty he popton tthe tena Feel apie sxbnatinsl populition estimates,

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28

ttyoe distrets of Kenya and found no link between fam income and soi nuteent balances, Is rater how much these results eo a small sample size ean he generalized othe population sa whole, and iŸ hese contradictory results are due to greater capacity of low resource endowment farms wo replenish natrents than expected, or he fact that nutrient levels eve not declined suicieny as yet o impact farm income

A ciffotent approach to measuring te impact of geographic Factors on poverty athe micro level has been taken by Jalan and Ravallon (2000) Using a six-year panel data set for Chins they regressed eonsumpion growth the household level on geographic variables allowing for non-stationary individual effects im the growth rates They found that there i a stony Significant geographic effect on consumption growth, shich they hypothesized was due so “poverty traps” They speculate that these arse as result of lower returns on atm honselold investments which, inthe presence of bartoving comerninls and lim on capital mobility reduce the grow rate of consumption

Fron these staios i ean be seen that no Unaahiguods felaionship exists between natal ‘capital endowntents and the incidence of poverty, particulrly at a macro seale of analysis While it does sem tat “geography matters the inypact of agre-limatie conditions on poverty is mitigated by several factors, principally human investments in productivity enbancing improvements California and Ital provide two striking examples of how massive investments ino inrigation and other inftasteutare have eesulted in the creation of highly productive sgriculral areas, although ther sgrocTimatic endowments eould be considered marginal

Another intervening factor in the spatial eorcelation between poverty’ and environmental cendossents ithe capacity of poputaions to migrate, among aeas of varying quliy, Tere is ‘considerable migration among the poor, but thee choice of resettlement location is often cconsrained According to Myers and Kent (1995) there is substantial migration among the Poor die to an inability to adopt to inhospitable environments, They estimate thst there are approximately 25 nllion sich “environmental refugees” inthe world, primarily toate inthe orn of Atiiea and the African Sahel, hut aso found nth

Mexico and South America, On the oltier hand, however, there are nications dt in some regions the zeographie mobility of the poor is constrained ether by administrative busiers oF ‘capital coastraints(Revallon an alan, 1999} dan subcontinent, in China,

Moving wo the miero level of analysis however, there i greater evidence of ink bewseen poverty and poor sol quality Soil quahty i highly heterogeneous over space, so micro level studies are necessary to capture the variations arnong income groups There are several posible expansions for why a coreatiom might exist If and values are id so land quail, then the Poorest quality land may be the most aecessibleo the poor Poor quality lands may be the only ‘option availabe to migrants tn dhese eases it s most likely that the poor quality ofthe land is ‘adetervinan of the poxery ofthe household Inadaton, there maybe eases where the poverty ‘of the Hosehold has lead to systematic depletion of the soil resoures, which Would aso result ina spatial corelation between poverty and poor soil quality

A lack of correlation between soil quality and poverty may be evidence of a low level of hotcrogencity ia soil quality he fare of land markets to account for land quality abundant supply of high quality frontier lands, or the impact of past investment efforts on both 3 public an privte scale Publi investments can either dircetly improve the and quality, of augment the private incentives and capacity to make improvement investsent For example, Fan and Havel (1997) foun igh degree of complementarity between public and private investments in azeas of low agricultural productivity, where a unit public investrent in infrastructure