Adoption of Soil Conservation Practices: A Revealed Preference Approach

The existing empirical literature on farmers’ use of soil-conserving, runoff-reducing farming practices, while sizable, contains relatively little information on the influence of cost on adoption decisions and on how farmers combine multiple practices into an overall conservation package. Such knowledge is important in light of current interest in reorienting agricultural policy toward environmental and resource conservation goals. This paper uses farmer survey data combined with information on standard unit costs of installing seven soil-conserving, runoffreducing practices obtained from a state cost sharing program to estimate latent demand models for each of these seven practices. All seven exhibit downward sloping demand. Topographical variations in adoption conform to expectations as well. The estimation results suggest that cost sharing should have substantial effects on the adoption of four practices. They also indicate strong complementarity among four others. The results are then used to derive implications for the design and implementation of cost sharing programs, which have been the principal policy used to address nonpoint source water pollution problems emanating from agriculture. JEL Classifications: Q15, Q16, Q24