Conducting economic policy analysis at a landscape scale: examples from a Philippine watershed

Given the strong and growing policy concern about high rates of hillside erosion and downstream sedimentation associated with upland agriculture, there is a need for analytical tools that can be easily used by researchers and environmental managers at several levels. In order to help meet this need, this paper presents an approach to policy modeling that emphasizes links between economic policy changes and environmental outcomes at a landscape scale. Stylized farm models are used to predict changes in household land allocation arising from agricultural policy changes, with explicit incorporation of biophysical feedback from erosion outcomes to agricultural productivity and subsequent crop choices made by optimizing farmers. Outcomes are combined to predict aggregate economic and environmental impacts. The method is applied to data from the Manupali watershed in the Philippine province of Bukidnon. Simulation results show how input and output pricing policies can have deleterious effects on the environment, but also show that in some cases policies that appear detrimental to producers—such as a modest tax on production of highly erosive crops—can produce welfare gains by discouraging patterns of land use that are unsustainable in the long run. The paper concludes that such analyses can help those involved with watershed management, from policy makers to local institutions, by focusing attention on key issues and trade-offs.