Social costs and incentives for optimal control of soil nutrient depletion in the central highlands of Ethiopia

Abstract

This study analysed trade-offs between short- and long-term objectives of soil use by smallholder teff farmers in Ethiopia. Compared to socially optimal solutions it was found that smallholder farmers discount the future at higher private rates leading to overexploitation of soil nutrients. Current soil conservation efforts, however, are well above static optimization levels suggesting smallholder farmers consider the long-term (dynamic) costs of soil degradation. There is evidence of high social gains from better utilization of soil resources through appropriate policy such as tenure security, to improve incentives for smallholder farmers to adjust input use towards socially desirable dynamic optimization levels.