Incentives, opportunity costs and contract design for on-farm conservation in Ethiopia March, 2003 The Economics of Incentive Mechanisms for Biodiversity Conservation: Contract Mechanisms

Third BioEcon Workshop May 22 – 25, 2003 Abstract Among the in-situ and ex-situ conservation options available to conserve crop genetic resources (CGRs), on-farm conservation has recently attracted massive attention from concerned organizations. To make this option operational, placing incentives and removal of perverse incentives are believed to be crucial so that landraces of no immediate interest to farmers can be conserved. However, before placing sound incentives and designing contracts with farmers, we have to understand farmers’ motives for managing portfolio of traditional varieties and the opportunity costs they face when they are expected to use landraces. This paper empirically examines farmers’ incentives and generates the opportunity costs they are facing based on a household survey data collected from 198 sorghum growing farmers in Eastern Ethiopia. To study farmers’ incentives to maintain native varieties, we have adopted a utility-based model that considers on-farm diversity as a positive externality of farmers’ livelihood decisions. Accordingly, on-farm diversity is considered as the derived outcome of farmers’ revealed preferences subject to their concerns and constraints. Using such a framework, Poisson regression model is estimated. Opportunity costs are generated using different homogeneous treatment statistical models and further they are examined using switching regression model. As usual the paper concludes outlining the policy implications of the empirical findings to design contracts for on-farm conservation of CGRs.