BIO-ECONOMIC MODELING OF WATERSHED RESOURCES IN ETHIOPIA

This paper examines the theoretical and practical aspects of natural resource use in the poor tropics given limited technological and policy intervention. Results show that if farmers were to reallocate their land use activities based on land suitability, and utilize between 10-20% of their farm income to purchase and apply chemical fertilizer, their net returns could rise by over 50%. Increased specialization and application of fertilizer, however, results in a 24% increase in soil loss in the initial year as some erosive activities with high fertilizer-yield response functions are cultivated. In subsequent years, fertilizer use lowers the level of soil loss but is unable to adequately counteract the cumulative effects of erosion and hence yields decline. The best strategy in the short run is to combine fertilizer application with crop rotation based on changing land suitability. Shortfalls in on-farm staple grains supplies caused by such rotations can then be met from market purchases. Similarly, a secure land tenure policy is likely to impact positively on land conservation by increasing the farmer’s time horizon