Price and Subsidy Policy on Soil Conservation: Application to Smallholder Tea Growers

Abstract

The role of commodity prices and subsidies on the adoption of soil conservation has been widely debated yet is poorly understood. One reason for this is the complex nature of the relationship between soil loss and yield damage. This paper examines the effects of price and subsidy policy on adoption of soil conservation measures in tea lands in Sri Lanka. The soil conservation technologies considered are lateral drains, stone terraces and Sloping Agricultural Land Technique (SALT). The study uses a non-linear yield damage function to estimate tea yield loss due to soil erosion. The yield function is then used in conjunction with a simple analytical model to examine the effects of changes in price and subsidies on the incentives to adopt various soil conservation technologies. When there is a yield increment with soil conservation, increases in both prices and subsidies are found to make soil conservation economically attractive.