




































Ecology, Economy and Society–the INSEE Journal 3 (1): 31–46, January 2020 

 
THEMATIC ESSAY  
 

Soil Conservation in a Watershed: Institutional 
Alternatives 
 

Chandan Singha   
 
Abstract: The private, collective and public nature of soil quality in a watershed 
provides three different institutional alternatives for watershed management: 
individual, collective and government action. This study reviews the success and 
failure of these alternatives in different parts of the world. Individual action by a 
farmer is driven by the net present value of farm profit and the resale value of the 
agricultural land. However, individual action for soil conservation remains sub-
optimal due to the presence of negative externality and the short-run income loss 
to the farmer. Many government and development agencies have designed several 
mechanisms such as collective and government actions to internalise the 
externality. However, not all these alternative initiatives have been successful in 
ensuring successful management of soil quality in a watershed. 

 

1. INTRODUCTION 

Soil quality in a watershed has the characteristics of a private, collective and 
public good. Farmers have the property right to farmland and responsibility 
for farm soil quality. But soil erosion due to inefficient farm practices can 
affect soil quality of the neighbouring farms, especially the downstream 
farms in a watershed, thus causing a negative externality. Cooperative action 
among the farmers is therefore required to contain this externality for a 
collective good or the common property of a group of people. There are 
many stakeholders of a typical watershed: farmers, the government, and the 
general public. The government may have property rights over the upland 
forest land and grasslands. The general public has property rights over the 
watershed too. And it is this property right over the watershed that ensures 

                                                        
 Hindu College, University of Delhi, Delhi-110007, India; csingha@gmail.com. 

Copyright © Singha 2020. Released under Creative Commons Attribution-NonCommercial 
4.0 International licence (CC BY-NC 4.0) by the author.  

Published by Indian Society for Ecological Economics (INSEE), c/o Institute of Economic 
Growth, University Enclave, North Campus, Delhi 110007.  

ISSN: 2581-6152 (print); 2581-6101 (web). 

DOI: https://doi.org/10.37773/ees.v3i1.87  

https://doi.org/10.37773/ees.v3i1.87


Ecology, Economy and Society–the INSEE Journal [32] 

several things: water supply for the use of households and industry, safety 
from floods, carbon sequestration from forest and grassland etc. They are 
the public good services provided by a watershed. 

Collective goods are those available for collective supply and collective use 
of a group of people. In a watershed, upstream forests, grazing lands and 
soil quality can be characterized as collective goods. In literature, upstream 
forests, grazing lands and soil quality of a watershed are characterized as 
common property resources. Collective goods share characteristics of both 
public and private goods because they are divisible and rival in 
consumption (like private goods) while also being non-excludable (like 
public goods).1 Because they are non-excludable, the externalities associated 
with the supply and use of these resources create the familiar free rider 
problem. Much scholarly work has focused on explaining how collective 
action by the stakeholders can deal with this problem for the efficient 
management of these resources.2 

Samuelson (1954) defines public goods as goods available for joint 
consumption, with non-excludability and indivisibility properties, where, as 
in the watershed context, the supplier of the good may be one while the 
beneficiaries are many. In the present instance, forest and soil conservation 
in the uplands (by government and/or farmers) could benefit many in the 
downstream due to its role in controlling floods and providing fresh water. 
This means that upstream and downstream hydrological relationships 
obtain among the users of the watershed. Hence, an efficiently managed 
watershed provides private, collective and public good service to the 
people. 

Due to the public and collective good nature of a watershed, the market for 
many watershed services are either missing (for e.g., hydrological services, 
carbon sequestration, etc.) or are less than efficient as the price of food, 
wood, hydro power, etc. may not fully reflect the social cost. Under these 
circumstances, the optimal provision and use of collective goods by farmers 
to achieve the larger interests of the society such as hydrological services, 
carbon sequestration, etc. may not be possible. However, there exist several 
mechanisms to internalise the negative externality and to provide incentives 
for on-farm investment in soil conservation in the watershed. They are: “(1) 
moral suasion; (2) regulatory limits and economic penalties; (3) taxes on 
negative externalities; (4) tradable environmental allowances (permits for 
negative externalities); (5) investment subsidies; (6) indirect incentives; (7) 

                                                        
1 Cornes and Sandlers (1984; 1996) 
2 Some of them are Olson (2009), Ostrom (2000), Wade (1987), Chopra et al. (1990) and 
Baland and Plateau (1996). 



[33] Chandan Singha 

mergers; (8) payments for environmental services; (9) changing and/or 
strengthening property rights and liability systems; and (10) facilitating 
negotiation and conflict resolution” (Kerr et al. 2007). 

Overall, the institutional alternatives for the efficient use of soil quality in a 
watershed and the effective implementation of mechanisms to internalise 
the externality require, in practice, a combination of individual, collective or 
group, and government actions. This paper reviews some empirical studies 
dealing with these three institutional alternatives for soil conservation in a 
watershed. Section 2 discusses on-farm soil conservation and individual 
action. Section 3 deals with inefficient farm practices and collective action 
for containing the externality of soil erosion. Section 4 presents a discussion 
on forest conservation and government action. Lastly, Section 5 provides 
concluding comments. 

 

2. ON-FARM SOIL CONSERVATION AND INDIVIDUAL 
ACTIONS 

Inefficient agricultural practices could lead to soil erosion, which reduces 
farm productivity while significantly inflating the input cost. Concerns 
regarding the actual/potential decline in yield and the higher cost of 
production lead individual farmers to adopt conservation measures to 
reduce topsoil loss. Farmers are the owners of farmland on the basis of 
property rights. They make investment decisions regarding soil 
conservation considering the costs and benefits involved. In addition to the 
net private benefits from conservation measures, the resale and rental value 
of the land also influence an individual farmer‟s decision to invest in soil 
conservation.  

Lutz et al. (1994) provide evidence that the net positive benefit from 
agriculture may offer an incentive to the farmers to invest in soil 
conservation. In a study of several countries in Latin America, Lutz et al. 
(1994) empirically established investment in soil conservation by a farmer is 
driven by the market prices of both inputs and outputs. A study by 
Miranowski (1984) evaluates the impact of productivity loss on land 
management decisions in a watershed in Iowa, USA, and yields similar 
results. The author established that the expected rise in crop price in future 
(which would mean a higher expected future profit) may also encourage 
farmers to adopt more intensive soil conservation measures. McConnel 
(1983) established theoretically that the increasing soil loss over time was 
part of rational farm management choices and not due to a farmer‟s 
ignorance about the future. However, the possibility of soil loss could lead 



Ecology, Economy and Society–the INSEE Journal [34] 

to a decline in the resale value of land in future. The expected loss in future 
can force a farmer to invest in soil conservation. 

The studies of McConnel (1983), Lutz et al. (1994) and Miranowski (1984), 
however, ignored problems related to negative externality of soil erosion. 
The paths of private and social rate of optimal soil erosion could diverge in 
the presence of significant negative externality (Miranowski 1984) like 
change in hydrological cycle, increase in cost of water purification for water 
supply etc. In addition to externality, the eroded land slowly reduces the 
capability of the individual farmer to invest in soil and water conservation 
measures to halt the degradation of land due to the continuous fall in 
revenue and/or rise of cost in agriculture. Therefore, without proper 
monetary incentives, it is difficult for farmers to invest in degraded land 
(Barbier 1990). Moreover, some soil conservation techniques not only lower 
the yield of the crop in the short run but also raise the cost of production 
immediately. This short-run penalty on profit may also discourage the 
farmer to adopt on-farm soil conservation.  

In response to lack of adequate incentives for farmers to invest in soil 
conservation, the U.S. federal government has started providing technical 
assistance to farmers while sharing the cost of soil conservation measures 
(Walker and Young 1984) – this is one way of providing investment 
subsidies for soil conservation. For instance, in the Palouse region of the 
USA, the federal government has increased its expenditure in order to 
encourage on-farm soil conserving tillage system in order to manage crop 
residue. However, despite the progress in yield enhancing technology in the 
study area, the potential gain in crop yield was not realised due to the 
existing erosive farming system, i.e., the absence of tillage (Walker and 
Young 1984). A similar kind of initiative was undertaken in Australia. In 
New South Wales, for instance, a farm planning scheme provides technical 
(i.e., recommendations on specific soil conservation measures) and financial 
assistance (i.e., a long-term loan at cheaper rates of interest to farmers) for 
on-farm soil conservation measures.3 These and such assistances could be 
described as an amalgamation of moral suasion and indirect incentives to 
overcome the externality of soil erosion. In their study, King and Sinden 
(1988) revealed that soil conservation measures fetched a higher price and a 
higher rental value of land. 

The findings of Walker and Young (1984) and King and Sinden (1988) have 
established that investment subsidies, moral suasion and indirect incentives 
by governments in developed countries can provide farmers the incentive 
to undertake soil conservation measures. However, there have been many 

                                                        
3 See, King and Sinden (1988). 



[35] Chandan Singha 

instances of such measures falling short of the expectations in countries of 
the developing world. In developing countries, development agencies, 
governments and donors have spent substantial amounts of money to 
encourage farmers to adopt on-farm soil conservation measures. These 
measures have been diverse in nature and very much region-specific. They 
have combined indigenous, mechanical (e.g., stone bunding and terracing) 
and agronomic (e.g., agroforestry, minimum tillage, etc.) practices. Of these, 
the mechanical measures were funded by the government or donors. In the 
case of Nicaragua and the Dominican Republic, for instance, an investment 
subsidy and indirect incentive succeeded in incentivising farmers to adopt 
soil conservation for a limited period of time in a Soil Conservation Project 
implemented during the 1980s. It was however observed that farmers were 
not only abandoning soil conservation but physically removing 
conservation measures once the subsidy period was over (Lutz et al. 1994). 

Apart from the cost sharing strategy of soil conservation measures in the 
developing countries, governments have also tried to influence (i.e., 
regulate) output prices. For instance, Pagiola (1996) examined the role of 
the pricing policy on the return to terracing in the semi-arid region of 
Kenya by using experimental data where the Kenyan government had 
artificially raised the price of maize (the main staple food in the land 
degraded area) to incentivise farmer to adopt soil conservation. The 
empirical findings suggested that the increase in maize price had increased 
the net present value of the crop in steep slopes but had decreased it in 
shallow slopes. Therefore, the impact of the pricing policy adopted by the 
government on returns was not independent of the biophysical 
characteristics faced by the farmers. 

In addition, the problems with regard to implementation of on-farm soil 
conservation by an individual farmer are more prevalent in a developing 
country than in a developed country due to insecure property rights, wide 
spatial dispersion of agricultural activity and, consequently, the weak 
enforcement powers of the government (Pagolia 1996), free riding 
behaviour of farmers due to lack of incentives, and lack of awareness and 
inadequate financial capability of farmers with regard to the importance of 
cooperative institutions (Khisa et al. 2007; Van Rijn et al. 2012). 4 However, 
though important, these conditions are not in themselves sufficient as 
conditions to prompt the adoption of soil conservation (Shiferaw et al. 
2009). Since soil conservation benefits are partly private and partly public 

                                                        
4 The decision regarding conservation is also influenced by socio-economic factors, farm 
characteristics, market-access variables, social learning, and social networks (Teklewood et al. 
2014; Wossen et al. 2015). However, these factors are not the focus of discussion in this 
paper. 



Ecology, Economy and Society–the INSEE Journal [36] 

goods, as mentioned before, collective action could result in efficient on-
farm soil conservation decisions by farmers. 

 

3. INEFFICIENT FARM PRACTICES AND COLLECTIVE 
ACTION FOR CONTAINING THE EXTERNALITY OF SOIL 
EROSION 

The soil quality of farmlands is a collective good as the soil quality of a farm 
carries consequences for the quality of land in neighbourhood farms. It is 
especially so in the context of soil erosion in upstream farms, which could 
affect soil quality in downstream farms in a watershed. This upstream and 
downstream linkage creates interdependence among users of the resource. 
But, in a free market situation, getting farmers to adopt soil conservation 
technology voluntarily in order to achieve the goal of required adoption and 
diffusion of the technology is not easy. Soil conservation requires collective 
provision and use of soil quality in a watershed, especially in a micro 
watershed. Given this externality of soil erosion, soil quality has to be 
conserved as a collective good. 

The studies of Wade (1987), Chopra et al. (1990), Ostrom (2004), and 
Baland and Plateau (1996) have suggested principles for successful 
collective action for managing collective goods like soil quality in the 
context of externality. They are presented as operating principles for or 
limits to collective action. The institutional characteristics for successful 
collective action include: (i) the characteristics of user groups, (ii) the 
presence of institutions for discussion of common problems, (iii) the 
presence of rules for sharing the costs and benefits of collective action, (iv) 
the existence of sanctions and punishments for not adhering to rules of 
cooperation, (v) the presence of mechanisms to resolve conflicts, and (vi) 
the recognition of the user group‟s property rights to the resource by 
government. Some examples of successful cooperation for managing 
collective goods in the Indian context can be found in Wade (1987) and 
Chopra et al. (1990), among other studies. 

The possibility of successfully managing topsoil loss through collective 
action also depends on the demographic composition of the group since 
the demographic composition and organisational structure of the group 
may influence the outcome of collective action for soil conservation. For 
instance, a heterogeneous group in terms of ethnicity and social class may 
reduce cooperation. Even the size of the group (large or small) and 
inequality among group members may create problems regarding 
coordination within the group (Shiferaw et al. 2009). However, problems 
that hinder the emergence of collective action due to heterogeneity among 



[37] Chandan Singha 

group members can be minimized, if not eliminated, by the strict 
enforcement of rules for collective action and the fostering of reciprocity 
among group members (White and Runge 1994).  

As far as soil conservation is concerned, collective action could entail a 
certain network externality that would act as the driving force behind 
farmers‟ efforts to adopt soil conservation. According to Meinzen-Dick et 
al. (2002), farmers take action to ensure soil conservation not only because 
of their dependence on agriculture for their livelihood but also due to 
growing pressure from peer groups or other farmers from the locality. In 
many micro watershed projects in India, NGOs too have persuaded 
farmers to voluntarily adopt soil conservation measures and/or voluntarily 
contribute to community labour for soil conservation efforts (Kerr et al. 
2007). Willy and Holm-Muller (2013), who studied whether collective action 
can act as a driving force behind farmers‟ adoption of soil conservation 
measures in rural Kenya, reported that, in their study area, there were a 
number of collective action initiatives, including physical and/or financial, 
to manage natural resources. The findings of the study suggested that 
collective action by the farmers resulted in the efficient management of soil 
conservation. A study by Nyangena (2008) in the context of watershed 
conservation programme in rural Kenya confirmed these findings. 

Collective action does not always mean physical and/or financial support by 
individuals within a group as, in some cases, it can go beyond these 
supports. For instance, in the land care approach adopted in the Philippines 
in the mid-1990s, the group, after formation, identified the local level 
problems about natural resource degradation. They then took upon 
themselves the responsibility of disseminating information and mobilizing 
action by and financial support from the community to improve the 
condition of land, water and vegetation. Cramb (2005), who evaluated the 
impact of the land care programme on the individual adoption of soil 
conservation (natural vegetative strips and contour hedgerows) in the 
Philippines, found that participants in the land care group had a positive 
and significant impact on the adoption of soil conservation measures.  

The above example suggests that collective action in soil conservation 
underscores the power of moral suasion as a tool to overcome negative 
externalities. However, instances of collective action have been reported 
where mechanisms other than moral suasion have been used to overcome 
externalities. In India, the provision for imposing a penalty for illegal 
grazing, in the form of a fine by the local government, exists in many areas 
in order to ensure better land management under community forestry. In 87 
villages of the Indian dryland state of Rajasthan, a tax has been introduced 
to discourage overgrazing as well as a fee for grazing in order to conserve 



Ecology, Economy and Society–the INSEE Journal [38] 

top soil under World Bank‟s Integrated Watershed Development 
Programme (Kerr et al. 2007). In addition to these mechanisms, a form of 
the merger is practised in the watershed of Sukhomajri village in India, 
where villagers share water, forest and pasture products among themselves 
irrespective of the ownership (i.e., status and area) of land. Here, 
groundwater is treated as a common property of the watershed rather than 
the private property of the owner of the land. This kind of collective 
sharing of the benefit provides incentive to the dwellers to conserve land 
(Chopra et al., 1990).  

Given that the soil quality of a watershed is collective good, governments 
and/or development agencies encourage collective action through 
institutional mechanisms for better management of watershed development 
programme. For instance, in semi-arid region in India (parts of Maharashtra, 
Karnataka and Andhra Pradesh) users‟ groups were put in place by 
implementing agencies to set rules and their monitoring: grazing and 
deforestation in upper reaches of treatment area, cultivation of water 
intensive crops in lower reaches of treatment area and community labour to 
build soil and water conservation measures in treatment area. Some examples 
of such projects were: MYRADA, Aga Khan Rural Support Programme and 
several major bilateral watershed programmes with European countries. 5 
Number of studies evaluated the environmental and socio-economic 
outcomes of these watershed projects. Findings of Kerr (2002) and Reddy et 
al. (2004) suggested that various watershed development programmes under 
study were able to preserve natural resources with modest improvement in 
some of the livelihood indicators. In another watershed intervention, villagers 
collaborated in constructing ponds and trenches, planting trees and plugging 
gullies, etc., to improve agricultural outcomes. These interventions took place 
on both private and public land in Madhya Pradesh, another Indian state in 
the semi-arid region. Hope (2007) in his study established that the treated 
villages experienced a reduction in water collection time in the dry season. 
However, the treated villages experienced no significant gain in the return to 
farming.  

In addition to the above, there are other case studies which show that 
collective action is moderately successful in preserving soil and water vis-à-
vis the provision of tangible economic benefit. For instance, Shiferaw et al. 
(2009) studied the contribution of collective action in a watershed of semi-
arid region of India to community investment in natural resources (wells, 
check-dams, ponds, etc.) and household welfare and poverty reduction 
(livestock, food security, seasonal and permanent migration, etc.). This 

                                                        
5 See, Kerr (2007) and Kerr (2002) for details. 



[39] Chandan Singha 

study considered two strands of variables: a) enabling institutions and b) 
participation and organisational performances, in order to measure 
collective action. A number of variables, like the existence of rules to ensure 
co-operation and the fraction of members who respect the various rules, 
were used to measure the enabling institutions. To capture participation and 
organisational performance, the study used the fraction of members 
participating in user group meetings and the percentage of well-managed 
user groups. It established a strong correlation between collective action 
and increase in community investment in natural resources while reporting 
a statistically insignificant association between changes in natural resource 
conditions and farm outcomes. 

As mentioned before, the success of collective action in managing natural 
resources is dependent upon various factors like group size, distribution of 
benefits, etc. In addition, the probability of success through collective 
action depends on exclusively defined property rights (Reddy et al. 2007). In 
many tropical countries, forest land is owned by government. Collective 
action cannot work efficiently in forest areas where private property right is 
absent or is not well-defined. Besides, in many developing countries there 
are varying property rights to land even within watersheds. Often, private 
property is in the form of farmland owned by farmers in the downstream 
and forest land upstream is owned by government. Farmers adopt number 
of on-farm soil conservation measures individually or collectively, as we saw 
before, but forest areas face the threat of deforestation, seen in many 
countries, including tropical countries, although the forest cover upstream 
provides some very important ecosystem services, among them the 
provision of hydrological services and soil conservation as well as the 
maintenance of soil nutrients downstream and biodiversity. Forest, 
therefore, is an important component of a watershed (Pattanayak 2004) and 
government intervention is required for its conservation since neither 
market mechanisms nor collective action can optimally ensure that it 
renders the services identified above. 

 

4. FOREST CONSERVATION AND GOVERNMENT ACTION 

Governments directly try to internalise the externalities of watershed 
management by investment, regulation, ban, penalty, subsidy and innovative 
incentives like payment for ecosystem services. Governments of many 
countries in East and South Asia (e.g., Thailand, Taiwan, China, Malaysia 
and India) have imposed a logging ban (Label & Daniel 2009; Lu et al. 2001) 
as well as restrictions on grazing (Kerr et al. 2007) in upland forest in order 
to mitigate downstream impact. 



Ecology, Economy and Society–the INSEE Journal [40] 

A number of empirical studies that have investigated the effects of upland 
forest conservation through government intervention have provided 
evidence of significant benefits to stakeholders who are located 
downstream of a watershed. In Malaysia, for instance, Vincent et al. (2015) 
have shown that the conservation of virgin (undisturbed) and logged 
tropical forest located in the mountainous terrain of the country reduced 
the cost of water treatment in the coastal plains that were converted to non-
forest land. In another such government initiative, Pattanayak and Kramer 
(2001) and Pattanayak and Butry (2005) found that regeneration of forest 
cover in the upstream watershed provided drought mitigation service to 
downstream farmers in Indonesia. 

In contrast, many studies have revealed that regulations imposed by the 
government can be inefficient due to typical command and control type 
problems. Veloz et al. (1985), for instance, analysed soil conservation 
benefits in the context of a hydroelectric dam in the mountain watershed of 
the Dominican Republic, where the government had laid down guidelines 
for land use patterns in the four slope classes of the watershed: a) Class A 
(3% to 20% slope) – mulching and contour ploughing along with traditional 
agriculture, b) Class B (21% to 35% slope), and Class C (36% to 50% slope) 
– agro forestry in place of cropland and renovation of rangeland 
respectively, c) Class D (more than 50% slope) – afforestation in existing 
crop and rangeland. The findings revealed that except for farmers in slope 
class A, those in other slope classes earned negative private net present 
value. 

To internalise the externality of the farmer in the upland, governments in 
many countries also provide incentives such as compensation in monetary 
form to farmers of a region to change the existing land use pattern on their 
land. For instance, in the Midwest US changes in land use from upland 
forest and wetlands to farm and pastures has increased the intensity of 
flooding, deteriorated water quality, and threatened biodiversity. Given that 
the restoration of land has the potential to benefit the community at large, 
the US senate passed the Wetland Reserve Programme Bill in 2002. Under 
this bill, the government offers farmers compensation for restoring forest 
and wetland on private land (Zedler 2003). 

To address the failure of the market to deal with the externality of upstream 
stakeholders affecting downstream stakeholders, governments in many 
countries have started facilitating mechanisms to pay for ecosystem services 
for the purpose of managing natural resources. The payment for ecosystem 
services can be seen as a Coasian contract (Pattanayak et al. 2010), where the 
government is directly or indirectly involved in money transfers to upland 
farmers conditional on the conservation of forest and biodiversity. The 



[41] Chandan Singha 

difference between payment for ecosystem service by design and other 
approaches to checking externality such as regulatory limits, economic 
penalties, taxes and tradable permits is that the former is based on the 
„beneficiary pays principle‟ while the latter are based on the „polluter pays 
principle‟(Engel 2016). Under the payment for ecosystem services principle, 
a farmer in a particular area receives payment for a fixed tenure contract. 
The US and European Union are the pioneers in adopting the practice of 
payment for ecosystem services. In the US, the government pays USD 1.7 
billion per year to farmers, which is conditional upon maintaining forest 
cover on a portion of farmland and evidence of measures for sustainable 
agricultural practices including soil conservation. Countries of the European 
Union also spend USD 7.2 billion per annum as payments to farmers to 
maintain forest cover and to derive the benefits of ecosystem services 
(Armsworth et al. 2012).  

In the context of developing countries, payment for ecosystem services is 
important due to certain reasons. First and foremost, mountains in 
developing countries contain huge portions of tropical forest, which plays a 
major role in providing environmental benefits. Secondly, both 
governments as well as the majority of the people are resource poor. Hence, 
any scheme related to payment for environmental services can be seen as 
win-win situation which would reduce poverty while preserving the forest 
(Pattanayak et al. 2010). Examples of facilitation by the government for 
payment for ecosystem services can be seen in Latin America, where the 
longest running programme for payment of ecosystem services, the Pagos 
por Sercios Ambientales, in Costa Rica was initiated by the Costa Rican 
government in 1997 (Arrigada et al. 2012). In Asia, too, there are examples 
of payment for ecosystem services for the purpose of protecting and 
maintaining the vegetative cover. In China, for instance, the main objective 
of the Sloping Land Conservation Program was to reduce soil erosion 
through afforestation in the 12 million hectares of the upper reaches 
(Pattanayak et al. 2010). In Southeast Asia, many governments have 
facilitated the Rewarding Upland Poor for Environmental Services 
(RUPEES) project, which is a payment mechanism to the upland poor to 
adopt land conservation (Kerr et al. 2007). 

However, the findings of several studies (Ferraro 2008; Winscher et al. 
2008) suggest that the rate of success of payment for ecosystem services to 
preserve and restore forest is limited. The first precondition for the 
effectiveness of payment for ecosystem services is a well-defined property 
right which, as discussed before, is not always found in developing 
countries. The efficacy of the scheme also depends upon the administrative 
targeting of the beneficiary, the degree of compliance and administrative 



Ecology, Economy and Society–the INSEE Journal [42] 

monitoring, and the enforcement capability of the implementing agency 
(Arrigada et al. 2012; Engel 2016). 

 

5. CONCLUSION 

This study reviewed the institutional alternatives for soil conservation in a 
watershed. Soil quality in a watershed has the characteristics of a private, 
collective and public good. The three institutional alternatives to protect a 
watershed are: on-farm individual, collective and government action. Since 
these actions are not mutually exclusive, a distinct categorisation of 
institutional alternatives and comparing their role in soil watershed 
management is difficult. Nevertheless, this study reviews a number of 
empirical studies on watershed management, especially in the context of soil 
conservation, and provides evidence on the roles of individual, collective 
and government action. 

As the studies reviewed show, farmers invest in soil conservation if they 
realise that soil erosion will reduce their agricultural profit and the resale 
and rental value of farmland. However, due to the presence of externality 
and insufficient financial capability, on-farm investment in soil conservation 
remains sub-optimal. This has led governments and development agencies 
to implement several mechanisms such as penalties, taxes, direct and 
indirect subsidies. Nonetheless, evidence of success of these measures to 
encourage on-farm investment by farmers is very limited, especially in 
developing countries. 

It is also well-established that soil quality in a watershed is a collective good. 
Consequently, various development agencies have tried to develop 
intuitional mechanisms for successful collective action to manage soil 
quality in a watershed. But the success of the collective action depends on 
an effectively determined set of rules; mechanisms to monitor farmers and 
to tackle defectors through regulatory limits and penalties; and the ability to 
cope with conflict and to provide solutions to disputes over property rights. 
Available empirical evidence suggests that the outcome of the collective 
action to maintain soil quality and to provide tangible benefits to 
stakeholders of watersheds remains moderately successful. 

It is quite clear that government intervention is also required to protect 
watersheds on account of market failure. It is also a fact that the upland 
areas of watersheds in tropical countries are covered with forests which are 
mainly under government control. Governments have taken many 
initiatives to protect forest cover such as ban on logging and grazing, 
regulation of land use patterns, and subsidies and conditional cash transfers 



[43] Chandan Singha 

to farmers for protecting forest cover. Like the other two institutional 
arrangements, evidence of the success of government action in maintaining 
forest cover to protect watershed is also mixed. 

The review of literature on individual, collective and the government action 
on soil conservation come up with key policy implication. It is necessary to 
get over the schematic perspective that stakeholders can/cannot preserve 
watershed and recognise their inclination and capacity to bear the burden of 
watershed conservation across site, and over time. Therefore, recognising 
the elements which subscribe to constructive watershed management by 
stakeholders can provide valuable input in identifying where watershed 
development programme can be implemented easily, and where extra effort 
of development agencies is required. 

 

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