The Future of Smallholder Farming in Eastern Africa - Uganda ...

5.3: Determinants of soil conservation investments using a 2SLS model
We now move to the results of the 2SLS model 20 presented in Table 5.4. Most of the
variables are transformed into natural logs with the exception of the dummy variables. We
find that when the data sets are combined, education, sex, and location are significant. None
of the variables of the equation for Machakos are significant, whereas for Taita-Taveta, seven
variables are significant. These include lagged crop output, education, extension, sex, age,
household size, and farm size per capita. None of the variables included to capture social
capital are significant in the three equations.
As argued earlier, Machakos has a higher level of terraces than Taita-Taveta.
Education is positive and significant both combined and separately for Taita-Taveta.
Education is a very important component. Shultz (1964) argues that investment in schooling
facilitates the transition from traditional agriculture, which is characterized by low
productivity, to modern agriculture where productivity is very high. He further argues that
illiteracy does not mean that people are insensitive to the marginal costs and returns in
allocating productive factors at their disposal; it nonetheless means that the human agent has
fewer capabilities than he would have if he had acquired the skills and useful knowledge
associated with schooling.
20 Instruments (variables assumed to be correlated with social capital but not with the other regressors) included
in the 2SLS regression are length of stay in the village, the influence one has in making the village better,
whether people trust each other on matters pertaining to lending and borrowing in the village, whether people in
the past joined together to address a common issue, or to petition government officials or political leaders with
the goal of solving a village development problem.