Risks and returns from soil conservation: evidence from low‐income farms in the Philippines

Gerald E. Shively

Agricultural Economics, 1999, vol. 21, issue 1, 53-67

Abstract: This paper examines risks and returns associated with soil conservation on hillside farms in the Philippines. Stochastic efficiency analysis is combined with a heteroskedastic regression model to assess the impacts of contour hedgerows on low‐income corn farms. Regression analysis indicates that, over time, contour hedgerows can improve yields up to 15% compared with conventional practices. The analysis also provides weak support tor a hypothesis that hedgerows are variance reducing. However, results show that the reduction in yield variability afforded by hedgerows is modest, and that yield variability may increase by as much as 5% as hedgerow intensity rises. Tests for stochastic dominance show that, compared with the conventional tillage system, hedgerows do not constitute an unambiguously dominant production strategy. Stochastic elticiency with respect to a function is used to identify a range lor the coefficient ol relative risk aversion within which hedgerows dominate conventional tillage. Results suggest this range would be rather high; hedgerows dominate the conventional cropping strategy only lor decision‐makers with relative risk aversion coefficients in the range 3‐5.5. Implications for soil conservation adoption in low‐income settings are discussed.

Date: 1999
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