The cost of soil erosion in Nicaragua

Abstract

The cost of soil erosion is not so much dependent on the physical amount of soil lost as determined by the economic effects of these losses. Soil erosion has both onsite and offsite effects. Loss of soil productivity is the main onsite effect, while enhanced productivity of downstream land, sedimentation and eutrophication of waterways and reservoirs are common offsite effects. In this paper we consider only the onsite effects of erosion. The loss of agricultural productivity is, however, studied within a broader economic framework than usual. By incorporating the direct economic effects of soil loss into a general equilibrium model, it is possible to shed light on some of the many interlinkages between agricultural activity and other parts of the economy which are important for determining the social cost of soil erosion. Based on model simulations, we find that soil erosion represents a considerable drag on the Nicaraguan economy, but that the burden of soil erosion depends on conditions and policies in non-agricultural markets such as the labour market. Furthermore, the sharing of the burden is not always to the disadvantage of the peasants. While uncertainties in data and modelling prevent us from drawing strong conclusions, the present study underlines the importance of considering the overall economic environment when policy proposals for mitigating excessive soil erosion is formulated.