Poverty, Resource strongScarcitystrong and Incentives for Soil and Water.pdfVIP

POVERTY, RESOURCE SCARCITY AND INCENTIVES FOR SOIL AND WATER CONSERVATION: ANALYSIS OF INTERACTIONS WITH A BIO-ECONOMIC MODEL 1 2 Bekele Shiferaw and Stein Holden 1International Crops Research Institute for the Semiarid Tropics (ICRISAT) Patancheru 502 324, Andhara Pradesh, India E-mail: mailto:b.shiferaw@cgiar.org 2Department of Economics and Social Sciences Agricultural University of Norway ABSTRACT The paper examines the interlinkages between population pressure and poverty, possible impacts on household welfare and land management, and the consequent pathways of development in a low potential rural economy. A dynamic non-separable bio-economic model, calibrated using data from the Ethiopian highlands, is used to trace key relationships between population pressure, poverty and soil fertility management in smallholder agriculture characterized by high levels of soil degradation. Farm households maximize their discounted utility over the planning horizon. Land, labor and credit markets are imperfect. Hence, production, consumption and investment decisions are jointly determined in each period. The level of soil degradation is endogenous and has feedback effects on the stock and quality of the resource base. This may in turn influence land management choices. Under high population pressure, land becomes dearer relative to labor. This is likely to induce conservation investments, especially when conservation technologies do not take land out