Farming or burning? shadow prices and farmer’s impatience on the allocation of multi-purpose resource in the mixed farming system of Ethiopia

In crop-livestock mixed farming system where farm yard manure (FYM) is considered as important multi-purpose resource such as source of soil organic matter, additional source of income and household source of energy, soil fertility depletion could takes place within the perspective of the household allocation pattern of FYM. This paper estimates structural FYM-allocation model in the presence of corner solution, with the objective of examining the role of various returns to FYM and farmer’s impatience on the propensity to allocate FYM for alternative purposes. We illustrate the model using data based on a random sample of 493 farm households in the central highlands of Ethiopia. We find that the higher the selling price of FYM is the higher the incentive for farmers to divert the resource from farming to marketing for burning outside the farm households. A farmers’ decision to turn FYM from farming to marketing due to heterogeneity in time preference is also an alternative account to explicate the correlation between farmers’ impatience and resource allocation. The implication is that the high discount rate and the rise of price encourage current consumption that has long term effect on the sustainable management of soil resource. The results are of paramount importance for the design of sustainable land management policy where soil fertility depletion is salient for low agricultural productivity.