Economics of soil erosion and wetland degradation: A case study from Argentina

Date of Completion

January 2005


Economics, Agricultural




Soil erosion has been recognized as one of the biggest problems of agriculture worldwide and even more so in developing countries. This dissertation models the dynamic effects of soil erosion both at the farm level and its off-site cumulative effects on inland wetlands by using optimal control theory. Based on a productivity approach, two empirical procedures are derived from the theoretical model. One procedure relies on a limited data set to estimate the shadow price of soil erosion. The other procedure estimates the off-site impacts of soil erosion on wetland services, specifically flood control, that have been gradually reduced due to sedimentation between 1975 and 2001. These estimates of on-site and off-site impacts of soil erosion are then used to assess the cost of agricultural modernization due to environmental degradation and to establish a baseline for policy analysis. ^ The empirical studies are done in a watershed of about 1.4 million hectares located in the south of Córdoba, Argentina, where agricultural modernization driven, mainly by market forces, has been gradually moving away from low input to intensive agriculture. This transformation is causing an increase in production but it is also reducing the long-term productivity of agriculture had and degrading wetlands. The results show that agricultural modernization has gradually increased the cost of soil erosion. Between 1986 and 1999, the total cost imposed by agricultural modernization was between $182 and $316 million in real 2000 dollars. Assuming that the historical trend holds, the baseline measured by the net present value loss (at a 6% of discount rate) for the next 30 years will be about $121 million, which includes $81 million lost due to future wetland degradation and $40 million lost due to increasing the soil erosion rate on-site. The results also suggest that loss of wetland services by degradation can be as important as the loss of the wetlands themselves. However, the former is often ignored in the political agenda. Finally, the study concludes that along with agricultural modernization, a policy to control soil erosion and prevent inland wetland degradation should be established. ^