Environment and Development Economics

Table of Contents - August 2012 - Volume 17, Issue 04  

Theory and Applications

The impact of shadow prices and farmers' impatience on the allocation of a multipurpose renewable resource in Ethiopia

Hailemariam Teklewolda1

a1 Department of Economics, School of Business, Economics and Law, University of Gothenburg, P.O. Box 640, 40530 Gothenburg, Sweden. Tel: + 46 76 5843729. Fax: +46 31 7731043. Email: Hailemariam.Teklewold@economics.gu.se

Abstract

In a mixed farming system in which farmyard manure (FYM) is considered an important multipurpose renewable resource that can be used to enhance soil organic matter, provide additional income and supply household energy, soil fertility depletion could take place within the perspective of the household allocation pattern of FYM. This paper estimates a system of FYM allocation regressions to examine the role of returns to FYM and farmers' impatience on the propensity to allocate FYM to different uses. We parameterize the model using data from a sample of 493 households in Ethiopia. Results indicate a heightened incentive for diverting FYM from farming to marketing for burning outside the household when returns to selling FYM and the farmer's discount rate are high. These reveal the need for policies that will help to reduce farmers' impatience and encourage the substitution of alternative energy sources to increase the use of FYM as a sustainable land management practice.

(Received August 10 2011)

(Revised March 02 2012)

(Accepted May 16 2012)

(Online publication July 11 2012)

Footnotes

Financial and logistical support for this study from the Ethiopian Institute of Agricultural Research (EIAR) and Swedish International Development and Cooperation Agency (Sida) through the Environmental Economics Unit, University of Gothenburg is gratefully acknowledged. The paper has benefited from the comments of participants in the XIIIth Congress of the European Association of Agricultural Economists, September 2011, Zurich, Switzerland; the 13th Annual BIOECON Conference ‘Resource Economics, Biodiversity Conservation and Development’, September 2011, Geneva, Switzerland; Department Series Seminar, University of Gothenburg, November 2011. Special thanks go to three anonymous reviewers, as well as the editors, for careful reviews and helpful suggestions. Constructive comments and suggestions from Gunnar Köhlin and Menale Kassie are also highly appreciated.