The Economics of Desertification, Land Degradation, and Drought

suitable method to value off-site effects related to land degradation. (A review of studies applying
hedonic pricing, contingent valuation, or choice experiments is provided in a later section.)
Choice Experiments
Choice experiments, another survey-based method, ask an individual to choose the most preferred
option or alternative from a set of proposed options. These options differ in their characteristics or
attributes. Attributes are selected so that they meaningfully describe differences between options in
order to explain preferences. Each attribute consists of a set of levels to represent variations in the
respective attribute among the options. Attributes and levels are combined into options according to
statistical design principles (Louviere et al. 2000). Choice experiments can detect the relative
importance of the different attributes and can identify willingness to pay for single attribute changes
as well as for aggregate benefits of different policy scenarios.
Productivity Change Approaches
The productivity change approach is the most commonly used method to value land degradation,
particularly when looking at soil erosion. This method is based on the idea that a value can be placed
on the services the land provides—usually, the agricultural output that it can generate. This approach
assumes that all impacts of land degradation manifest themselves through a loss of agricultural
productivity. Therefore, land is valued in terms of lost production, sometimes termed the production
equivalent of degradation (the value of foregone production). Studies typically measure the physical
effects of soil erosion, salinity, and soil compaction on crop yields and productivity, though rarely are
all the impacts of all the processes that land degradation comprises analyzed. The choice of an
appropriate benchmark, or baseline, against which changes are compared is of fundamental
importance. An appropriate benchmark is to compare the costs of land degradation to the costs and
benefits of actions against it.
Even though implementation of the productivity change approach is relatively
straightforward, the method has its shortcomings. Crop prices may be poor indicators of value when
markets are poorly developed or distorted by agricultural policies (Crosson 1998). It is also often
difficult to account for farmers’ reactions to degrading soil characteristics. Since farmers are likely to
adopt a mix of inputs to offset damages caused by erosion, it might take some years before
degradation manifests itself in the form of yield declines.
Box 3.2 gives an overview of methods used to quantify the extent of land degradation (mostly
measured as erosion). Linking agricultural yields and productivity to land degradation is a difficult
task. Crop yields, however, depend not only on land degradation but also on a variety of factors, such
as management practices, choice of crops, climatic factors, pests, and diseases. Agricultural
productivity is the result of the dynamic interaction of numerous factors, and thus it is difficult to
disentangle the effect on crop yield related to land degradation only (Lal 1987). Isolating the effects of
a single factor, such as erosion, on crop yields represents a real challenge. The impact of soil erosion
on productivity can be estimated econometrically or through biophysical models that simulate the
interaction between biophysical factors on productivity. The Erosion Productivity Impact Calculator
(EPIC), developed by Williams, Renard, and Dyke (1983), is an example of a model that generates
erosion rates and the resulting loss of crop yields, given farm management practices. The parameters
and coefficients were fitted to conditions in the United States; therefore, this model has to be adapted
for use under other local conditions, requiring a great deal of data. Aune and Lal (1995) developed the
Tropical Soil Productivity Calculator for special conditions in the tropics. 45
45 Other models are Crop Environment Resource Synthesis (CERES); Agricultural Production Systems Simulator
(APSIM); Soil Conservation in Agricultural Regions (SCAR); and Productivity, Erosion, and Runoff Functions to Evaluate
Conservation Techniques (PERFECT) as reviewed in Enters (1998).
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