| Soil erosion on cultivated cropland is a perennial and growing problem. It is widely believed that the recent financial crisis in agriculture has caused farmers to cut back on their efforts to conserve soil, thereby exacerbating the erosion problem. This research examines whether such a link between farm financial stress and soil conservation actually exists.;An optimal control model of the farmer's conservation decision is used to formally derive the hypothesis that financial stress leads to lower levels of current conservation investment. Empirical analysis is conducted on data from a survey of 151 farms in southwest Wisconsin. As expected, variables measuring farmland characteristics, especially the percent of cropland in the steepest slope classes, have a positive and highly significant impact on annual dollar investment in erosion control practices. However, variables measuring financial stress such as net income, the interest rate on debt, and the rate of return on farm equity are not significant in explaining conservation investment. The estimated coefficients for farm size, age, education, crop rotation, tillage practice and cost-sharing are also not significantly different from zero.;Analysis of a subsample containing farmers age 55 and older finds that farmers who intend to transfer the farm to a family member spend more on conservation than those planning to sell the farm. Unlike the results from the entire sample, financial factors such as net income and participation in cost-sharing have a positive and significant effect on the conservation investment of these older farmers.;Several policy implications of the empirical results are explored. One of the arguments in favor of additional government assistance to the agricultural sector is that farmers in dire financial straits cannot afford to conserve. However, this research indicates that the much publicized link between farm financial stress and insufficient conservation investment may not exist. Thus, while there may be valid reasons for bailing out failing farms, encouraging soil conservation does not appear to be one of them.;The research also provides further evidence that participation in the government's soil conservation cost-sharing program does not induce farmers to invest in conservation more than they would have in the absence of cost-sharing. |
