Economic impacts of shifting sloping farm lands to alternative uses

Abstract

China has been engaging in one of the world’s largest ecological conservation programs, the Slope Land Conversion Program (SLCP), which is also called the grain-for-green policy. This paper is intended to address the economic impacts of shifting from farm lands to four other land use options using land expectation value (LEV). Sensitivity analyses are conducted to examine the impacts by changing interest rates, prices, wage, and tax rates. Current subsidy program is examined as well. The results show that farmers would suffer more losses for planting pine and orchard trees (citrus and chestnut) and tea when interest rates increase. In addition, planting pine trees, orchard trees, and tea create more benefits than annual crops when wage rates increase by 25%. The provision of subsidies by the government could reduce loss from shifting farm lands to alternative uses, but under the current situation (interest rate, price, wage rate and subsidy program), farmers still would prefer orchard trees and tea to pines because orchard trees and tea could generate more land value than pine trees. For the benefit of the program, several policy measures are recommended.