Valuing soil conservation benefits of agroforestry: contour hedgerows in the Eastern Visayas, Philippines

Trecs can he considered as investments made by economic agents to prevent depreciation of natural assets such as stocks of top soil and water. In agroforestq systems farmers use trees in this manner by deliberately combining them with agricultural crops on the same unit of land. Although advocates of agroforestry have asserted that soil conservation is one of its primary henefits, empirical estimates of these benefits have bzen lacking due to temporal and spatial complexity of agroforestry systems and the nonrnarket aspect of soil capital assets. This study designs and applies a bio-economic framework for valuing the soil conservation benefits of agroforestr).. The framework is tested with econoxnetric analysis of data from surveys of households in Eastern Visayas, Philippines, where USAID/Govemment of Philippines introduced contour hedgerow agroforestry in 1983. By constructing a weighted soil quality index that also incorporates measures of soil fertility, texture and color in addition to erosion, we extend previous economic studies of soil resources. This index is regressed on a variety of farming and site specific hio-physical variables. Next, we use a Cobb-Douglas profit function to directly relate agricultural profits and soil quality. Thus, the value of soil conservation is measured as a quasi-rent differential or the share of producer surplus associated with a change in soil quality. Because this framework assumes the existence of markers, the assumption is tested by analysing the statistical significance of consumption side variahles, e.g., number of household members. on production side variables, e.g., profits. Instn~mental variables are used to handle the endogeneity of the soil index in the profit equation. Seemingly unrelated regression (SUR) analysis is used to accommodate correlation of errors across the soil and profit equations. Regression results reveal the importance of agroforestry intensity, private ownership, land fragmentation, and familiarity with soil conservation as positive covariates of soil quality. Analysis of production data indicate the importance of market prices, education, farming experience, farni size, topography, and soil qualit) as positive covariates of household profits. Investments in agroforestry to improve or maintain soil capital can increased annual agricultural profits by US353 for the typical household, which is 6% of total income. However, there are significant up-front costs. Given that small farmers in tropical upfands are important players in the management of deteriorating soil and forest resources. policy makers may want to considcr supporting farmers in the early years of agroforestry adoption. Published by Elsevier Science B.V.