Soil Conservation and Imperfect Labour Markets in El Salvador: an Empirical Application of a Dynamic Control Model of Farm Production

An important issue in the study of soil conservation is the impact that imperfect markets can have on farmers’ decisions regarding resource management. Rural areas in developing countries are characterised by high transaction costs and imperfect markets. Since soil conservation is labour-intensive, the functioning of agricultural labour markets and the availability of off-farm work opportunities are likely to affect soil conservation effort. In this paper I develop a dynamic control model of agricultural production in the context of lack of access to labour markets in order to analyse how soil management decisions are affected. An empirical application of the model is developed using data from a 1996 farm household survey in El Salvador. The results of the model are confirmed by the econometric estimation, showing that soil conservation is negatively affected by off-farm employment and smaller family labour force only for farmers who face a missing agricultural labour market. Soil degradation seems to be closely associated to conditions that prevent farmers from fully participating in rural markets. Moreover, rural policies that promote the non farm rural sector may have an unwanted negative impact on soil conservation and soil conservation programs would be more effective if they promoted labour-saving practices.