This paper assesses the tradeoff between non-farm income and on-farm soil and water conservation investment by smallholder farmers in the semi-arid tropics of India using a dynamic bioeconomic model. This modeling approach allows understanding the complex interaction and feedback between household economic decision making and sustainability of natural resource base. A dynamic crop-livestock integrated bio-economic has been developed and calibrated for a Semi-Arid Tropics (SAT) watershed village in India where integrated watershed development program was implemented. The village level model is used to assess the impact of improved access to off-farm employment created by watershed development program on household welfare, land degradation and Soil and Water Conservation (SWC) labour used on-farm to reduce run-off and soil erosion. The simulation results revealed that improved non-farm employment opportunities in the village increases household welfare but reduces the households’ incentive to use labour for conservation leading to higher levels of soil erosion and rapid land degradation in the watershed. This indicates that returns to labour are higher in non-farm than on-farm employment opportunities in the village. This appears to be no win-win benefits from improving the access to non-farm income in SAT rainfed farming villages. Complementary policies are required to protect the natural resource base.


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