Soil conservation, output diversification and farm income: Evidence from hillside farmers in Central America

This dissertation studies the determinants of adoption of soil conservation technologies, output diversification and income-generating activities among hillside farmers in Central America. The analysis is based on a cross-sectional data set of 695 farm households obtained from surveys applied to representative samples of beneficiaries of two natural resource management projects in El Salvador and Honduras. A model of adoption of conservation technologies, farm output diversification and income was formalized, wherein households simultaneously allocate natural and human capital to three different income-generating activities: staples or subsistence crops, cash crops, and off-farm employment. ^ The results indicate the greatest gains in household income are associated with the activities more directly related with land allocation, such as area with cash crops, output diversification and soil conservation practices such as crop-mulching, green manure, and minimum tillage. In contrast, we found that conservation structures such as terraces, stonewalls and drainage ditches are not profitable at the farm-level, at least in the short run. These results also reaffirm the strategic role of portfolio diversification and natural resource management in fighting rural poverty, since land allocation away from the traditional production of subsistence crops, like corn and beans, substantially increases household income. ^ Human capital, measured by average household education, soil erosion awareness, participation in training activities, frequency of rural extension visits, and years of involvement with a natural resource management project, plays a positive and significant role on the determination of income levels and adoption of conservation technologies. Farmers involved in training other farmers and participating in communal organizations are also more likely to adopt conservation technologies, which reveals the importance of the social dimension on the adoption of conservation technologies. Education plays a significant and positive role in all income-generating activities. The returns from schooling are highest in cash crop production and off-farm activities and lowest in food staple production. These returns to education by economic activity suggest that farm households may reap rewards from schooling by abandoning traditional agriculture, where returns from schooling are limited, in favor of modern agriculture or non-crop production, where the returns are higher. Larger farms are more engaged in conservation activities, implying that poorer farmers may face a larger risk of land degradation. ^ Several public policy implications are drawn from the analysis, including: (a) Support for farm diversification; (b) Promote conservation practices and structures based on detailed studies of expected profitability; (c) Improve the use of incentive mechanisms wherein the farmer is more a client than a beneficiary; (d) Guarantee the access to formal education and technical assistance via rural extension; (e) Stimulate the development of communal organizations; (f) Facilitate the access to land ownership; (g) Examine the optimal duration of the natural resource management projects; and (h) Develop local labor markets and infrastructure to expand job opportunities to improve household income and quality of life.