Land use with endogenous environmental degradation and conservation

This paper endogenizes environmental degradation imposed by agriculture in a land-use model by introducing feedbacks between productivity and the application of inputs. Farmers maximize the value of their output by allocating inputs between production and conservation. We study this division of agricultural production resources between cultivation and maintenance with a model of individual agricultural decisions in a small region, possibly the size of a single state or a few states in the United States. We study the model for insights into how degradationconservation processes modify agricultural production decisions. We give particular attention to how degradation-conservation processes would alter the extensive deforestation occurring in developing countries such as Brazil. The analysis of the model shows a mitigating influence of labor-intensive conservation measures to counteract local environmental degradation. The economic situation of the individual farmer is improved when output prices increase, roads are improved, or there is a decrease in the price of purchased inputs. Under these improved conditions, cultivation intensity increases and there is a resultant degradation in the soil, but the degradation is less than would occur without the conservation feedback. In the case of decreased wages, degradation may actually decrease if conservation effects are sensitive to an increase in labor. In all cases, the conservation feedback reduces the environmental impact of increased cultivation. Improving the economic picture for the individual farmer also makes remote sites more profitable and tends to increase the area of deforestation, but this tendency to expand is modified by the increased profitability of cultivation within the existing region. In a number of cases, very effective conservation can actually decrease areal extent of cultivation, leading to more intense cultivation over a smaller region. The analysis also indicates that cultivation should be discouraged on more fragile soils. On the better sites, soil degradation is increased but the soils can withstand more degradation. The total area under cultivation tends to decrease, resulting in less deforestation.