International Food Policy Research Institute (IFPRI) and Ethiopian Development Research Institute (EDRI). Conference on "Towards what works in Rural Development in Ethiopia: Evidence on the Impact of Investments and Policies". December 13, 2013. Hilton Hotel, Addis Ababa.

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
Sustainable Land and Watershed
Management (SLWM) practices in the
Blue Nile: A systems evaluation
Emily Schmidt, Paul Chinowsky, Sherman Robinson, Ken Strzepek
IFPRI ESSP-II
Towards what works in rural development in Ethiopia:
Evidence on the impact of investments and policies
December 13, 2013
Addis Ababa
1

2. Background
• The SLWM programs implemented are designed to:
• Decrease erosion and increase agricultural yields
• Improve rural household welfare
• Important to understand the linkages among:
•
•
•
•
Agricultural production increases
Corresponding output price changes
Labor allocation
Household income effects in program areas
• Previous research suggests that maintenance of SLWM
structures in rural Ethiopia is limited

3. Analyses in study
Hydrological
Model
Economic
Model
Exogenous
Factors
Systems
Model

4. Systems model
Multi-market model that is modeled in GAMS
• Simulates the effects of SLWM investments on:
• agricultural production
• producer and consumer prices
• household income
• Models different production systems by slope type
• Compares different investment simulations in
order to identify optimal investment strategy.

9. SLWM Investments
Soil Bunds
Stone terraces
Wood check dam
Stone check dam

10. Area in Blue Nile Basin with similar land
characteristics of Mizewa watershed

11. Design of Systems Simulations
A series of SLWM simulations are compared to the
calibrated base:
1. Calibrated base simulation with imposed downward trend
(Schmidt & Tadesse, 2012; Holden and Shiferaw, 2002)
2. Terraces built on middle and steep slopes (MST)
3. Calibrated base simulation with fertilizer application
4. MST with fertilizer application
5. MST with fertilizer application and 50% reduction in
transportation costs

12. Simulation Results: Production
Total Maize Production in watershed
Million Tons
3
2.5
2
1.5
1
0.5
0
Base
MST *
Fertilizer Base
MST and Fertilzer
MST, Fertilizer, and
-50% transport cost

13. Average production and price by slope in Fogera
Base with
MST* Fertilizer
Base
Maize (million tons)
Steep
0.07 23.9%
Mid
1.08 22.8%
Flat
0.15 -0.7%
Maize price (1000 birr/ton)
Fogera
1.11 -8.8%
Fertilizer, M
ST,
-50%
Fertilizer transport
and MST
cost
61.2%
59.9%
60.0%
98.5%
94.8%
57.9%
100.0%
96.3%
59.3%
-22.8%
-30.7%
-25.2%
• MST increases production by 23 – 24%
• Pairing fertilizer with MST almost doubles production
• An increase in production (supply) with no increase in demand
causes prices to fall

14. Average household income
0.8
Base
0.7
0.65
MST
0.6
0.55
Fertilizer Base
0.5
MST and Fertilizer
0.45
*MST = Middle and Steep Terraces
2030
2027
2024
2021
2018
2015
2012
0.4
2009
Thousand birr / HH
0.75
MST, Fertilizer, and
-50% transport cost

15. Simulation Results: Income by slope type
Year 2030
HH income
(1000
birr/person)
Base
Fertilizer,
MST,
-50%
Fertilizer Fertilizer transport
MST*
Base and MST
costs
Steep
0.51
-4.4%
7.2%
9.5%
14.3%
Mid
0.62
0.1%
10.1%
20.9%
28.7%
Flat = Middle and Steep Terraces
0.51 -3.1%
*MST
5.8%
-1.0%
2.0%

16. Benefit cost of policy options to incentivize
SLWM sustainability
Change in
Household
Consumption
(NPV)
0
Marginal
benefit of
government
investment
(NPV)
-
Government
Cost
(NPV of cost)
-
Marginal
Benefit:
Cost
-
-2.5
-
0
-
7.5
22.9
20.1
10.0
-
6.95
0
0
1.5
-
22.9
2.8
2.1
1.4
21.7
1.6
0.9
1.8
21.1
1.1
0.89
1.2
Simulation 2009-2030
Household
3% discount rate
Consumption
(billion birr)
(NPV)
Base
94.2
Land Investments
Terraces on middle and steep
slopes (MST)
91.7
MST with government
transfer
101.7
Fertilizer increase
117.1
Fertilizer increase and MST
114.3
Road Investment Scenarios (w/ fertilizer and MST)
Transport cost
decrease 50%
117.1
Transport cost
decrease 30%
115.9
Transport cost
decrease 20%
115.3

17. Conclusion
• Producer benefits of only SLWM do not outweigh the
costs
– Do not compensate foregone off-farm labor opportunities
– Do not increase output enough to compensate for price falls
• More profitable for producers (within the 20 year
timeframe) to invest in fertilizer and allow the land to
continue to degrade

18. Conclusion
• A more comprehensive investment approach may be
necessary to ensure that SLWM is maintained.
• SLWM + fertilizer
• Government transfer (BC ratio 1.5)
• Improved roads (BC ratio 1.2 – 1.8)
• Successful SLWM programs must take into account the
social benefits (improved land, decrease consumer
prices), but also private income gains in order to
incentivize rural farmers to maintain SLWM structures