Spatial heterogeneity and adoption of soil conservation investments: integrated assessment of slow formation terraces in the andes

This paper presents an integrated assessment approach to quantify soil conservation investments. The integrated assessment approach is based on a statistically representative sample of data of individual decision units (farms) and spatially explicit bio-physical and economic models. The integrated assessment approach is applied in an economic analysis of investments in slow formation terraces in the Peruvian Andes. Under a plausible parameterization, the model predicts the observed regional level of terrace adoption, but also shows that returns to terrace investments are spatially variable and sensitive to key economic and bio-physical conditions and assumptions. The case study shows that even in a region with agriculture on steeply-sloped hillsides, adoption of conservation investments such as terraces is likely to be less than 100%, and may be less than 10% if farmers must pay for the full costs of the investment. The importance of heterogeneity provides an explanation why economic analyses of soil conservation technologies based on ‘representative’ data often find positive rates of return, yet the technologies are not widely adopted in the field. More generally, this finding suggests that heterogeneity may provides an explanation of incomplete adoption of technologies that does not rely on ad hoc behavioral assumptions such as risk aversion.