The Use of Subsidies to Achieve Efficient Resource Allocation in Upland Watersheds

This paper evaluates the use of subsidies to achieve efficient resource utilization, beginning with a discussion of the nature of erosion and methods of estimating rates of erosion. The second section presents a short review of the literature on onsite and offsite erosion damage assessment, which concludes that in tropical regions it is easier at present to identify onsite productivity losses than offsite damages. The next section presents an evaluation of the economic arguments for government intervention, followed by a discussion of possible alternatives to subsidies (such as direct intervention, moral suasion, taxes, and marketable pollution permits) to achieve more efficient resource use. This paper evaluates the use of subsidies to achieve efficient resource utilization. It is increasingly recognized that efficient management of resources in agriculture requires a systems approach and that focusing on a single input or crop can lead to privately and socially inefficient decisions. Indeed, in many cases the management practices used to control erosion are also used to improve water quality, therefore, much of the discussion will also be applicable to water quality improvement projects.