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Abstract
This paper investigates the determinants of farmers' indigenous soil and water conservation investments in the semi-arid
tropics of India. A simple theoretical model is used to develop hypotheses about the determinants of investment under
alternative factor market conditions, and these are tested using data on conservation investment from three villages. We find
that conservation investment is significantly lower on leased land in two of the study villages and lower on plots that are
subject to sales restrictions in one village, suggesting the potential for land market reforms to increase conservation
investment. In one village, households with more adult males, more farm servants, and less land invest more in conservation,
as predicted by the model of imperfect labor markets; and households with more debt and off-farm income invest more,
consistent with the model of imperfect credit markets. Evidence that conservation investment is affected by factor market
imperfections is weaker in the other villages, where investments are much larger, suggesting transaction costs as the source of
the differences between villages. Other factors that have a significant effect on investment include the farmer's education and
caste, characteristics of the plot (size, slope, irrigation status, and quality ranking) and the presence of existing land
investments. The results suggest the importance of accounting for differences across communities and households in factor
market and agroclimatic conditions in designing programs to promote investments in soil and water conservation. © 1998
Elsevier Science B.V. All rights reserved.