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Abstract
Degradation of land continues to pose a threat to future food production potential in many developing economies. Various
approaches, mainly based on command-and-control policies, have been tried (with limited success) in the past to encourage
adoption of erosion-control practices by farm households. High transactions costs and negative distributional impacts on the
welfare of the poor limit the usefulness of standards and taxes for soil and water conservation. One innovative approach is the
use of interlinked contracts which create positive incentives for land conservation. This study analyses the social efficiency of
such policies for erosion-control in the Ethiopian highlands using a non-separable farm household model. Incentive contracts
linked with conservation seem to be promising approaches for sustainable resource use in poor rural economies. This may
suggest that conservation programs should give greater consideration to better fine-tuning and mix of policies that help achieve
both economic and environmental objectives.© 2000 Elsevier Science B.V. All rights reserved.