The dynamic economic effects of soil erosion on agricultural productivity: The case of Ecuador

The purpose of the present study was to examine at the farm level the economic effects of soil erosion on agricultural productivity. From the case of Ecuador a dynamic framework was applied to analyze the existing relationship between soil erosion, crop production, and farmer's management decisions. Annual time-series on soil erosion rates and yield estimates for potatoes and pasture were obtained using the Environmental Policy Integrated Climate simulation model (EPIC), which is a physically based computer model that simulates farm-level interaction of the soil-climate-plant management processes. EPIC output was used to identify the functional forms that relate (a) soil loss rates to farming practices, and (b) potato and pasture yields to soil depth. Farming practices were represented by three different types of a potato-pasture rotation and any possible combination in the use of tractors and bullocks to till the soil. To run EPIC, detailed data on weather, hydrology, soil characteristics, crops, and farming practices for two watersheds in the Carchi province of northern Ecuador were utilized.; Based on the estimated functional forms and market prices for potatoes and pasture, a dynamic programming model was developed to maximize the representative farmers' discounted net stream of profit over a relevant time horizon, given a set of two farming choices: tillage and selection of the cropping pattern. The programming model was written in GAMS (General-Algebraic-Modeling System) to solve for the optimal farming practices that maximize the farmer's net profit over a 40-year time period. To understand how market conditions affect the optimal cropping choices and the use of tractors and bullocks in the soil tilling activity, a sensitivity analysis was conducted to (a) explore the combined effects of changes in the relative price of pasture and changes in the discount rate on the optimal choices, and (b) examine the combined effects of changes in the relative price of bullocks and changes in the discount rate on the optimal choices.; The conclusions drawn from the analysis call for the implementation of government policies to promote land conservation and reduce the incentives currently existing in the market that lead to a faster depletion of the available soil.