**The Economic Impact of the Conservation Reserve Program on Households
and Counties**\
Project Summary

The Conservation Reserve Program (CRP) is a USDA program in which rural
landowners are paid to convert marginal, highly erodible farmland from
cultivation to forest or grassland. This has been an important component
in the effort to reduce the quantity of topsoil lost, and quantity of
pollutants and sediments that enter surface water bodies. In addition to
the environmental impact, the CRP has had economic and social impacts in
rural communities. Enrollment of farmland in the CRP provides a more
secure income stream and retirement income for some rural landowners. On
a larger scale, county and regional economies change when CRP
enrollments rise. Economies in agriculturally-dependent counties may
suffer as landowners shift from cultivation to CRP, as landowners reduce
purchases of agricultural inputs. In a more diversified economy,
landowners may spend more money in the local economy.

Interviews and a survey of rural landowners will elicit information
about the reasons why landowners choose to enroll land in the CRP, the
importance of CRP payments to the farm economy, the perceived
environmental benefits, levels of satisfaction with CRP economics and
environmental results, and the changes in landowner movement,
consumption, and shopping behavior.

Although it is widely understood that farmers often enroll in the CRP as
a means to mitigate potentially unreliable income, the actual impacts or
benefits of the program in this type of situation are not well
understood, and remain generally unstudied. This research will approach
the economic effects of the CRP on farmers and local areas, yielding
improved understanding of the use and implications of this particular
agri-environmental program for economic survival and adaptation
strategies in rural areas. This study will provide useful information
that can be used to guide conservation policy that will lead to both
environmental sustainability and economic stability in rural America.

The Economic Impact of the Conservation Reserve Program on Households
and Counties\
Program Description

**Introduction:**

American agriculture is highly productive, but it is associated with
serious environmental consequences. As it is currently practiced,
agriculture contributes large amounts of non-point source pollutants
into surface water bodies (Horan and Ribaudo 1999). Great quantities of
fertilizers and pesticides are required to achieve and maintain the
American level of production, but instead of remaining in place where
they can be beneficial, some of these agricultural chemicals are washed
into surface water bodies (Bhuyan *et al. *2002). In addition, the
sudden and wide-scale conversion of native prairie and forests to
cultivated farmland resulted in dramatic increases in soil erosion (Knox
2001). The catastrophic Dust Bowl of the 1930s served to awaken the need
for changes in agricultural practices and provided the impetus for soil
and water conservation policies.

The Conservation Reserve Program (CRP) is one such program. Established
with the Food Security Act of 1985, it was designed to reduce soil
erosion by encouraging the conversion of cropland into permanent
vegetative cover. Landowners enroll highly erodible or environmentally
fragile farmland for a period of ten years, and in return receive a
subsidy payment.

**Background:**

The Conservation Reserve Program has had a beneficial impact on the
physical environment. Some environmental benefits of the program include
increased soil quality (Karlen *et al. *1998), increased surface quality
(Ribaudo 1989), decreased surface runoff and decreased soil erosion
(Khanna *et al. *2003). Szentandrasi *et al. *(1995) adds that the CRP
has provided other environmental benefits; increased wildlife habitat
provides forage, cover, and nesting areas for migratory and
non-migratory birds, small mammals, and large game animals, and improved
water quality benefits fish and other aquatic life. These environmental
benefits may translate into increased economic benefits. Reducing soil
losses also reduces declines in soil fertility, and consequently reduces
declines in agricultural productivity (Miranda 1992). In addition, the
improvements in environmental quality not only increase recreational
opportunities for hunting, bird watching, photography, and hiking on CRP
land (Szentandrasi *et al. *1995, Hansen et al. 1999), but also improve
recreational amenities on nearby non-CRP land (Siegel and Johnson 1991,
Babcock *et al. *1996). Thus the CRP is effective in improving
environmental quality.

However, American agricultural producers exist within an economic
environment characterized by a great amount of uncertainty. In addition
to capricious weather and cycles of drought (Diggs 1991), farmers are
challenged by spiraling capitalization and debt (Halweil 2000),
fluctuating land prices (Johnson and Haigh 1970), rigid agricultural
policies (Lence and Hays 2002), and volatile domestic and international
markets over which they have no control (Napton 1989). There is little
margin for mistakes or bad

luck. Communities and regions that support (and are supported by)
agriculture are also subject to similar volatility. In addition, Young
*et al. *(1991) asserts that the CRP shares the costs of conservation
between taxpayers and farmers, but Martin *et al. *(1988) counters that
although the benefits accrue to society, the costs are imposed upon farm
communities located in environmentally fragile areas.

CRP enrollments are often located in resource-dependent rural
communities. Resource-dependent communities are vulnerable to cycles of
boom and bust, and population loss (Hyberg et al. 1991). Populations
swell during boom periods, but decline with falling commodity prices. As
the constricting population base becomes inadequate to support stores
and service providers, the loss of community services fuels further
out-migration (Troughton 1997). Schools, which play a large role in
fostering social cohesion and sense of identity, are forced to
consolidate (Hudson 1996). Therefore, agricultural policy does not only
impact agricultural producers, but also affects the stability of the
regional agricultural community (Sengupta et al. 2000). Changes in
resource policy may result in unanticipated yet fundamental changes to
the rural culture. Change-inducedshocksmay be more than the system can
bear, and may result in structural collapse of rural societies and
cultures (Riebsame 1991).

Thus, in addition to changing the physical environment, the CRP also
affects economic and social changes to the rural landscape. The program
has the capacity to dramatically affect both the environmental quality
of rural America and the economic vitality of American farmers and
agriculturally-dependent communities. These changes occur at all scales,
from the household (i.e., the individual farmers) to the national scale
(Hyberg *et al. *1991).

On the local level, Shoemaker (1989) asserts that CRP payments affect
land values. On less productive land (where CRP payments are greater
than the revenue that could be generated from cultivation agriculture),
the excess amount that government payments are greater than the local
rental market becomes capitalized into the value of the land, changing
land rental prices. Farmers who enter land into the CRP avoid
production-related expenditures (e.g., fertilizers, machinery repair,
use-related depreciation), but they are still responsible for
time-related expenditures, such as interest payments, time-related
depreciation, and mortgage payments (Standaert and Smith 1989). Farmers
benefit from enrollment in the CRP no only from the subsidy payments
(which would have to cover fixed costs) but also from the reduction in
production costs.

At an aggregate level, communities that are more dependent upon
agriculture will be more negatively affected by CRP enrollment than for
those counties for which agriculture is less important (Martin *et al.
*1988). When landowners covert farmland into permanent vegetative cover,
they no longer have to purchase cultivation inputs such as seed,
fertilizer, and machinery. The subsidy payment may be used for purchases
in other sectors. This reduction in demand for agricultural inputs may
or may not be offset by an increased demand for other goods and
services.

Additionally, the agriculturally-dependent community may not
offerinitially, at leastthe goods and services demanded by the CRP
landowners (Broomhill and Johnson 1990). In agriculturally-dependent
economies offering a limited array of goods and services, producers
spend less on agricultural inputs in the local economy (hurting the
local economy) and spend more on goods and services elsewhere
(benefiting another economy). Some communities with insufficient
economic diversity will lose economic

strength in the form of increased leakage as a result of CRP enrollment.
Leakagewhich is the amount of money that is spent outside of the local
economy and does not become part of the income stream for a local
firmtends to be high in lower order communities (which offer a narrow
range of goods and services). The reduced demand for seed and
fertilizer, for example, leads to reduced profits for the local
supplier, which means fewer dollars spent for other local goods and
services, especially if there are few other sectors in the local
economy. A reduction in demand for farm inputs and services may be the
demand shockthat pushes some agriculturally-dependent community into
economic collapse.

Conversely, communities that offer a wider range of goods may benefit
from the change in consumption patterns. A regional service center, for
example, offers a wider range of goods and services, so the reduction in
spending in agricultural inputs is offset by an increase in spending in
other sectors. The community has to make some adjustments, but it can
absorb the change. It may benefit from the leakage of smaller
neighboring communities if it can meet the increased demand for other
goods. However, the regional service center will also experience some
(although not as much) leakage as consumers look for higher-order goods
that are not found in the local economy. Thus the impact of the CRP
varies spatially.

The social and economic consequences of the CRP may, in part, explain
some of its lack of effectiveness at achieving its environmental goals.
Subsidies in general lead to over-participation in a program, and this
reduces the programs effectiveness. For example, the problem
ofslippagewithin the Conservation Reserve Program

undermines its effectiveness. Slippage occurs as new farmland is put
under cultivation to replace farmland that the CRP removes from
production. Leathers and Harrington (2000) reported that some slippage
may be caused by program non-participants who increase production in
anticipation of higher prices. Wu (2000) points out that the program may
cause some non-cropland to be converted to cropland so that farmers may
benefit from increased commodity prices or maintain economies of scale.
Gersmehl and Brown (2004) assert that the slippage effects can cause the
effectiveness of the program to fail the national scale. If producers
are under pressure to meet fixed costs, they may be motivated to put
into cultivation other marginal land. This helps farmers maintain an
economy of scale and produces income, but it reduces the programs
effectiveness at meeting environmental goals. The soil erosion that
results from the farmland put into cultivation is likely to be as great
as from the farmland retired into the CRP.

In addition to looking at households and individual behavior, is also
useful to examine how the program affects county-scale change. Smith
(1995) points out the inefficiency of setting bid caps at the regional
instead of the county level. Tremendous variation exists in the physical
characteristics from place to lace, so setting the maximum allowable
rental rate for a given location using smaller units permits a better
grasp of local conditions. Instead of setting regional bid caps, the
maximum rental rate should be set at the county level for each class of
farm sizes in order to keep CRP payments close to the land rental rates.
Thus the scale of county is a large enough unit of aggregation in which
sufficient county-level data exists and is readily available, but is
small enough to be accurate. Regional-scale data may mask out local
variations.

The economic impacts of the CRP have been examined at the aggregate
level in several regions, including Missouri (Kalaitzandonakes and
Monson 1994), Montana

(Standaert and Smith 1989), Oregon (Martin et al. 1988), and Louisiana
(McLean-Meyinsse 1994). With the exception of eliciting information
about post-CRP land-use decisions (Johnson et al. 1997, Shakya and
Hitzhusen 1997, Cooper and Osborn 1998) and land values (Shoemaker
1989), most of the research examining the economic impacts of the CRP
have not been at the farm, household, or individual scale. However,
because individuals choose to participate in the program (or choose to
undermine the programs effectiveness by slippage), it is important to
understand how the program works at the individual level in order to
craft a program that is both efficient and effective. The effectiveness
of a voluntary pollution abatement program such as the CRP depends on
the number of participants, the amount of abatement of each participant,
and the response by the total number of landowners (both participants
and non-participants) in the market (Alberini and Segerson 2002). The
program is composed of enrolled individuals, and depends upon
individuals and their individual decisions. Therefore it is vitally
important to look at the actions and perceptions of the individual
landowners in order to understand the failings and successes of the
program.

This should result in a better program. Like other government programs,
the Conservation Reserve Program is expected to be effective, efficient,
and equitable. To be effective the program must meet its stated
objectives. An efficient program meets its objectives at the least cost
to society. A program is equitable if neither the benefits nor the costs
accrue unfairly to a single segment of the population. In order to
accomplish this, the full impactincluding all direct and indirect
effectson the people affected must be understood. Although an
examination of the full secondary impacts are beyond the scope of this
study, I hope to illuminate some of the factors that lead to enrollment
in the program, as well as reveal some of the consequences that result
from it.

**Objectives of the study:**

This study will examine individual perceptions of the CRP, motives for
enrollment in the program, behavior changes in response to program
participation. It will reveal how the program affects counties and
communities, and identify the factors that predict economic benefit.
Furthermore, it will identify the spatial variation and patterns to
degrees of benefit. This research will contribute to a broader
understanding of the Conservation Reserve Program, and may play a role
in the crafting of effective, efficient, and equitable policy.

In particular, I wish to examine how landowners perceive the
effectiveness of the CRP at meeting their needs. It is unrealistic to
expect farmers to support a program that does not provide them with at
least as much benefit by participation than they would have by not
participating. In order to continue the environmental benefits the
program provides, landowners have to share in the benefits as least as
much as they share in the costs. The popularity of the program among
producers suggests that it meets the needs of landowners, but the amount
of slippage indicates that other needs are not fulfilled. Additionally,
I will examine how landowners have changed their consumption patterns
since enrolling in the Conservation Program. I hope to analyze how
spending has shifted geographically. Where, for example, do landowners
purchase groceries now compared to

before they enrolled in the program. Has the Conservation Reserve
Program contributed to a restructuring of the sizes and distribution of
cities in the central Great Plains? The following hypotheses will be
used to guide the research:

1\) Households benefit from participation in the CRP.

The landowners who enroll in the program will gain from a more stable
and predictable income stream, reduced operational expenses, less risk,
and higher net incomes. Because the CRP is a voluntary program, it is
expected that landowners anticipate benefits to equal or exceed the
benefits from cultivation. However, reality may prove different than
anticipation.

2\) The CRP helps preserve family farms.

The family farm is iconic in American culture; the family farm
represents a value greater than a mere unit of production. Thus the
program might serve to protect this element of American culture. An
increase in income and a more secure income stream might permit smaller
landowners to remain profitable and remain in agriculture. This would
counter trends toward larger farms, fewer farmers, and regional
depopulation.

Alternatively, because the CRP does not tie landowners to their
parcelsthat is, landowners can continue to collect the subsidy whether
or not they remain on the propertyenrollment in the program may free
landowners to leave the family farm and migrate elsewhere. Thus the CRP
might reinforce the pattern of regional rural depopulation.

3\) Individual benefits vary spatially.

The benefits to the individual depend upon land values, productivity,
and proximity to urban centers, all of which vary spatially. Martin *et
al. *(1988) assert that in more productive areas setting aside land in
the CRP resulted in a loss of individual income, whereas in less
productive regions individuals experienced a net gain by participating.

4\) The CRP causes a change in the composition of local economies.

Given enough time, economies will adapt to the demand shifts for
agricultural inputs and other goods and services. In agriculturally
dependent counties offering a limited range of goods and services, the
reduced demand for agricultural products will lead to a reduced demand
for the other sectors of the economy. As the profit for agricultural
input firms (which is in part the income stream for the other sectors)
declines, profitability of the other sectors will experience a similar
decline. Over time, these economies might be expected to further
constrict.

Conversely, more diversified economies will experience a reduction in
demand for agricultural inputs, but since agricultural inputs represent
a smaller proportion of the total economy, the decline will not be felt
as acutely. In addition, because a wide variety of goods and services
are available to meet the demand growing, the increased spending on
these goods and services offsets the decreased spending on agricultural
inputs. The overall impact on these counties may be positive, especially
if these counties serve as service centers for nearby
agricultural-dependent counties.

5\) The effects of the CRP on counties vary spatially, and depend on the
degree of agricultural dependency and population characteristics.

Aggregate benefits also vary across space. Economies in counties that
are more agriculturally dependent have a retail sector predominantly or
entirely related to agricultural products. These economies will suffer
as landowners shift from cultivation to CRP, because landowners will
reduce spending on agricultural inputs within the county and will be
forced to go outside the county to purchase other goods and services.
Conversely, in more diversified economies that offer a wider range of
goods and services, producers will spend more money in the local
economy, and more of the money spent will remain in the economy. In
addition, rural communities that have greater economic linkages to
larger towns or cities tend to benefit from the citys growth (which
could be fueled in part by CRP subsidies), whereas rural communities
that are poorly linked do not experience the same degree of benefit
(Barkley *et al. *1996).

**Methods:**

In order to obtain data about individual and farm-level economic impacts
of the Conservation Reserve Program, a mailed survey, constructed and
administered according to Dillman (2000), will be sent to a sample of
2,000 CRP landowners in Kansas, Nebraska, Oklahoma, Colorado, and Texas.
Figure 1 shows the counties included in the study area with financial
support, as well as the study area without funding. The survey
instrument is currently pending review by the Kansas State University
Institutional Review Board.

The names and addresses of CRP participants will be obtained from the
Farm Service Agency. From the list of CRP landowners, a stratified
random sampling technique will be used to generate the sample
population. Dillman (2000) recommends multiple mailings as a means of
increasing response rate, so the survey will be mailed to the sample of
CRP landowners as follows: the complete survey with cover letter and
stamped return envelope, followed by a postcard reminder, another
complete survey with cover letter and return envelope, and another
postcard reminder.

In particular, the survey will disclose how the program impacts
individuals and households. It will reveal how individuals perceive
(correctly or not) the efficiency and efficacy of the program, and how
people react (i.e., the changes in their migration or shopping behavior)
to changes in household income produced by the Conservation Reserve
Program. The survey should also reveal motivations for and obstacles to
enrollment, and this may illuminate some of the reasons for slippage.
The survey will be composed of open-ended questions (e.g.,In what ways
has the Conservation Reserve Program benefited or harmed your
community?), as well as questions requiring responses ranked on a Likert
scale (e.g.,Based on your experience, how satisfied are you with the
CRP? 1=extremely dissatisfied, 2=dissatisfied, 3=neither satisfied nor
dissatisfied, 4=satisfied, 5=extremely satisfied). The survey questions
will elicit the following information:

*Level of satisfaction with the CRP. *Landowners are asked to rate their
satisfaction with a Likert scale.

*§ Motivations for enrolling in the CRP.*

What factors (environmental quality, reduction of risk and expenses,
stable income, retirement income) were considered more important when
landowners made the decision to enroll in the CRP?

*§ Obstacles to enrollment in the CRP *Landowners are asked to respond
to an open-ended question.

*§ Perceived Benefit or harm to households and individuals. *Landowners
are asked to respond to an open-ended question.

*§ Perception of the efectiveness of the program in reducing erosion,
improving water quality, and improving habitat.*

Landowners are asked to rate the programs effectiveness with a Likert
scale.

*§ Levels of absentee ownership.*

The county of residence is compared to the county in which the CRP
parcel is located.

*§ Changes in migration. *Landowners are asked if the changed residences
after enrolling.

*§ Spatial changes in spending habits*

Landowners are asked to indicate the city in which purchases of a
variety of goods and services (groceries, automobiles, insurance,
agricultural supplies, agricultural machinery, womens clothing,
financial services (including tax preparation and accounting services),
jewelry, sporting goods and recreational equipment, physician or primary
health care provider, gasoline, restaurant, bank (savings account), mens
clothing, toys or gifts, hospital, agricultural consultant, music tapes
or CDs, and drug store). Landowners are asked to specify the city where
the purchases would have been made in 1986, and where they would be made
now.

*§ Changes in of-farm employment*

Landowners are asked whether they or their spouses have any off-farm
employment (specifying the occupation and the county) now, and in 1986.

*§ Demographic information*

Landowners are asked to provide their age, gender, and level of
educational attainment.

The ordinal data from the Likert scales will yield sums and standard
deviations to compare responses to different factors, and a Spearmans r
will be used to measure rank‑

order correlations between factors. Content analysis will be used to
interpret the responses to the open-ended questions. Changes to the
local economies can be determined by comparing the composition of the
pre-CRP (i.e., before 1986) economy to that of the current economic
composition; I will examine how many firms and how many sectors were
represented before 1986, compared to how many are represented currently.
Although not all of these changes can be attributed entirely to the
Conservation Reserve Program, this study will show how the economic
landscape of the central Great Plains has changed. The county-level
aggregate information will be obtained from data published by the Bureau
Of Census, Bureau of Labor Statistics, National Agricultural Statistics
Service, and K-State Agricultural Extension Service.

In order to measure the impact of the program on local economies, I will
use a multiple regression analysis. Household income (or another
economic variable of interest) will serve as the dependent variable.
Independent variables would include the amount of CRP acreage, the share
of CRP staying in the local economy (derived from interviews), and the
change in demand for agricultural inputs. In addition, a set of control
factors (e.g., the relative sizes of various non-agricultural sectors in
the local economy, composition of the local labor force) will help
isolate the effects of the CRP from other changes in the economies.

In addition, I will conduct in-person interviews of a stratified sample
of the 1-2% of the survey population. This part of the study will be
more qualitative in nature, and will provide a better understanding of
participants perceptions on how the program impacts their farms,
families, and communities. I will use content analysis to derive
patterns and themes from the interview responses.

A tentative timetable for the study is as follows:

+-------------------+-------------------------------------------------+
| January 2005      | Obtain the mailing list of Conservation Reserve |
|                   | Program landowners from the Farm Service        |
| mid-February 2005 | Agency.                                         |
|                   |                                                 |
| March 2005        | Identify survey sample, and from that sample    |
|                   | for personal interviews.                        |
|                   |                                                 |
|                   | Mail first survey (with cover letter and return |
|                   | envelope). If landowners are farmers, this will |
|                   | be a period of time that is less busy and they  |
|                   | may be more inclined to complete and return the |
|                   | survey.                                         |
|                   |                                                 |
|                   | Mail first postcard reminder to those who have  |
|                   | not yet returned a completed survey.            |
|                   |                                                 |
|                   | Mail thank-you notes to those who have.         |
+-------------------+-------------------------------------------------+

mid-March 2005 Mail a second survey (with cover letter and return
envelope) to those who have not yet returned a completed survey

April 2005 Mail a second postcard reminder to those who have not yet
returned a completed survey.

Schedule and conduct in-person interviews.

Talk to FSA, SCS, and Agricultural Extension agents, collect secondary
data.

Begin content and regression analyses.

Present preliminary results at the Applied Geography Conference,
Washington, DC

Present results at the national Association of American Geographers
Conference, Chicago IL

Complete dissertation. By this time I will have submitted articles about
aspects of this research to at least two peer-reviewed refereed
publications.

**Dissertation Improvement:**

A Doctoral Dissertation Research Improvement grant will permit me to
embark on a more complete study of the economic impact of the
Conservation Reserve Program in the central Great Plains. The funding
will allow me to examine a much larger study area because I will be able
to travel greater distances to conduct interviews, talk to conservation
officers, and gather secondary data. Similarly, because postage
represents such a large proportion of my expenses, funding will enable
me to expand the size of the sample. I will be examine a larger amount
of area, which may reveal patterns in the economic landscape that are
not visible at a larger scale. Without the additional funding, I would
have to drastically limit the size of my sample and restrict my study
area to western Kansas. I would have to forgo the in-person interviews
altogether. Therefore, the funding would increase the scope of my
dissertation and the quality of my results.

**Conclusions:**

The integrity of the physical environment is vital to the cultural,
economic, and environmental sustainability of the central Great Plains.
Government policy plays a role in shaping that sustainability. I hope
that this study elicits information that will help to guide the creation
of an effective, efficient, and adaptive agricultural policy that can
sustain and improve environmental progress, while maintaining the
integrity of community and household economic structures. This study
will contribute to a greater understanding of the effects of the
Conservation Reserve Program on individuals and households, as well as
its effects at the county or community scale. I hope that this study
will help policymakers craft agricultural programs that will serve the
needs of economically vulnerable rural populations while simultaneously
enhancing the social welfare of the nation.

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