Cost–Benefit Analysis of Soil Degradation and Restoration - Principles of Sustainable Soil Management in Agroecosystems - page 242

indicate that some farmers would benefit from project implementation, while oth-
ers would lose, assuming that all use a real discount rate of 5% and a 25-year time
horizon. Those with land in slope class A would, on average, benefit; the net returns
per hectare they would realize by adopting improved tillage practices would exceed
status quo net returns per hectare. However, full project implementation would force
farmers who work on steeper land (slope classes B, C, and D) to make a change in
land use, which is, on average, not profitable for them.
Social-level analysis of soil conservation's on-site economic effects (Table 10.2)
yields results that are similar to the results of private analysis of those same effects. In
the former analysis, labor is shadow-priced at less than the minimum wage because
of high underemployment and unemployment in the DR. Also, the project's exported
outputs and imported inputs are evaluated using the parallel market exchange rate
rather than the official exchange rate, which overvalues the local currency. Even
after these adjustments have been made, social level analysis yields the same two
conclusions as private-level analysis, assuming the same discount rate, time horizon,
and accounting stance. First, as an entire group, farmers would benefit from project
implementation. Second, farmers with land in the higher slope classes, who would be
required to switch from traditional agriculture to agroforestry or reforestation, would
lose because of project implementation.
Broadening the accounting stance so as to incorporate the off-site effects of ero-
sion yields substantially increased estimates of the net benefits of soil conservation.
Shown in Table 10.2 are the net present values of extensions in the lifetime of the
Valdesia Dam obtained by conforming to project guidelines in selected slope classes.
For example, given project implementation in slope class A, the additional external
benefits of reducing erosion in slope class B (see Table 10.2) would greatly exceed
the private costs of doing so (see Table 10.1 ).
Proper conceptualization and analysis of reservoir sedimentation from an eco-
nomic perspective is extremely important if optimal corrective measures are to be
implemented. A core concept is the private versus social perspective or accounting
stance with respect to both space and time. A social or economic accounting stance
is primarily concerned with both on-site and off-site costs and returns or returns to
the total society over the long run. Several forms of corrective or shadow pricing may
be necessary in doing the social cost-benefit estimates; this complicates the analysis
and results in greater data needs.

TABLE 10.2
Results of Public Level Analysis

Slope Classes Where Project
Guidelines are Followed

Off-Site Benefits of
Compliance with Guidelines

Dam Lifetime

None 19 years 0

A 20 DR$1,755,000

A + B 25+ 9,350,000+

D 25 9,350,000