HOUSEHOLDS’ WILLINGNESS TO PAY FOR SOIL CONSERVATION PRACTICES ON CULTIVATED LAND IN SOUTH ACHEFER DISTRICT, AMHARA NATIONAL REGIONAL STATE OF ETHIOPIA: A CONTINGENT VALUATION APPROACH

Abstract

When the market for a certain good is competitive enough, economic activities can be studied by the market pricing mechanism. Because this is usually not feasible in case of non-marketed environmental goods, like soil in our case, with embodied natural and cultural heritage, particular methods for economic valuation of such goods have to be applied. This research presents the economic valuation of soil through assessing the willingness to pay of households for soil conservation in South Achefer District of Amhara Region. For this purpose the method of Contingent valuation was used to conduct an econometric analysis of willingness-to-pay using both Double Bounded Dichotomous Choice and open ended elicitation format question. Both primary and secondary data were collected for analysis using structured questionnaire. By employing a bivariate probit model, this study obtained the value of willingness-to-pay and identified its determinants from a survey results of randomly selected 156 sample households’ using a three stage sampling procedure. The result indicates that 48.08% of the surveyed household were willing to pay the initial cash contribution provided and the value of mean willingness to pay from both Double Bounded Dichotomous Choice and open ended question were found to be 36.46 and 27.23 Ethiopian birr per household per year respectively. The thesis used the average individual value of willingness-to-pay to calculate the aggregate willingness-to-pay and estimated the aggregate revenue of 942,928.52 and 704,243.95 Ethiopian Birr per year for the district respectively. The predicted probability estimation result of the model also shows that the probability of accepting both bid values, the initial and follow up bids is 9.24%. Similarly the probability of saying ‘yes’ only to the first and the follow up bid independently is 44.77 and 64.47% respectively. This study also empirically proved that, important variables determining willingness to pay of households’ for possible soil conservation programs in the study area for both responses of the bivariate regression model were found to be sex of the household head, annual income of the household, perception about soil erosion, initial Bid and frequency of extension contact. Therefore policy and program intervention designed to address soil erosion problems in the study area have needed to take in to account these important significant variables for effectiveness