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Muddy waters : economic analysis of soil erosion and downstream externalities

Journal article
Authors Anders Ekbom
Gardner Brown
Thomas Sterner
Published in Ghanaian Journal of Economics
Volume 6
Issue 1
Pages 74-107
ISSN 2309-8945
Publication year 2018
Published at Department of Economics, Environmental Economics Unit
Department of Economics
Pages 74-107
Language en
Keywords Micro analysis of farm firms, Optimal control theory, Resource management and Soil erosion
Subject categories Economics


Soil erosion and fertilizer leakage cause serious externalities in downstream environments throughout the world. Social costs are estimated to be very large and include, e.g., loss of health, reduced productivity due to pollution and eutrophication of freshwater resources, and degradation of aquatic and marine resources. The key optimal control models on soil capital management omit downstream externalities. Based on comparative statics analysis of our model, which includes downstream externalities, combined with an extended discussion on policy instruments, we conclude that governments should try to provide incentives to farmers, not primarily to stop soil and nutrient loss per se (since the farmers will look after their own soil capital) but to prevent negative externalities on downstream users, who have few opportunities to negotiate with the upstream farmers, who may even be unaware of the problems they cause.

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