Masters Theses

Date of Award

12-1986

Degree Type

Thesis

Degree Name

Master of Science

Major

Agricultural Economics

Major Professor

William M. Park

Committee Members

Luther Keller, Thomas Klindt

Abstract

Increased public recognition of the detrimental effects of soil erosion together with the demand for more cost effectiveness in the expenditure of public funds have led to recent innovations in the Agricultural Conservation Program (ACP), the federal government's major soil conservation incentive program. The two major innovations in the ACP are targeting of conservation funds to critically eroding areas and the variable cost share level option (VCSL). The VCSL option attempts to improve cost effectiveness by basing cost share rates on practice effectiveness and severity of erosion before practice installation.

The objective of this study was to evaluate the effectiveness of the VCSL option in West Tennessee, an area of intensive row crop production with some of the nation's worst soil erosion problems. The VCSL option was assessed from three approaches. First, the cost and effectiveness of conservation practices before and after the adoption of the VCSL option were compared for two West Tennessee counties. Second, for 1984 cost and effectiveness of conservation practices in all West Tennessee counties using the VCSL option and in all West Tennessee counties using uniform rate cost sharing were compared. Finally, a survey was mailed to all USDA personnel in Tennessee who had been involved in administrating an ACP program which used the VCSL option for at least a year to identify its administrative problems and strengths.

The results from both approaches used for comparison of VCSL and uniform cost sharing indicated that there was a general shift of practices to more highly eroding land and a decrease in the percentage of funds allocated to the least cost effective practices under the VCSL option. However, there was a decrease in overall public cost effectiveness under VCSL due primarily to a much higher average cost share rate.

The present incentive structure of the VCSL formula gives cost share rates equal to or greater than the typical 50 percent uniform rate on fields with relatively low pre-practice erosion rates and for some practices which are not relatively cost effective. Cost share rates can also reach the maximum of 75 percent at relatively moderate pre-practice erosion rates. This likely results in payments in excess of what is actually required to encourage conservation on moderately eroding fields and an insufficient differential in incentives to encourage more conservation on the most highly eroding fields.

Appropriate modification of the VCSL cost share rate structure may improve the cost effectiveness of ACP funds spent for soil conservation in West Tennessee. The VCSL formula could be revised so that the differential between the highest and lowest cost share rates would be spread throughout the dominant range of pre-practice erosion rates rather than concentrated in the lower to mid range as is presently the case. This modification alone might also reduce the average cost share level. Otherwise, a reduction in the whole range of cost share rates may be needed to reduce the average level. Such a reduction in the average cost share level would allow limited funds to go further, that is, to induce adoption of conservation practices on a greater number of acres.

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