This study explores a modelling approach to investigate the interactions betweenterracing, water availability, and land use decisions and farmers’ incomes in a studyarea in the Peruvian Andes. We tested the hypothesis that these interactions affect thesimulated spatial distribution of impacts because of technology changes as well asaggregate impacts. To do this a model simulating water redistribution at the catchmentscale is linked to a site-specific model of land use and management, using the trade-offanalysis modelling system. The results indicate that the interactions do not affect theaggregate impacts but they do result in different spatial patterns of land use and farmincome in the study area. The simulated effects of terraces on productivity are affected bythe spatial patterns of terracing. These findings suggest that, although field-levelinteractions may average out in aggregate analysis, the effects they have on the spatialpattern of land use allocation and income may be relevant for analysis of environmentalimpact and equity studies in which the spatial distribution of effects is important.