PAYMENT FOR ENVIRONMENTAL SERVICE TO ENHANCE RESOURCE USE EFFICIENCY AND LABOR FORCE PARTICIPATION IN MANAGING AND MAINTAINING IRRIGATION INFRASTRUCTURE, THE CASE OF UPPER BLUE NILE BASIN

Using the contingent valuation method, this research project explores how irrigation beneficiary households in the Upper Blue Nile Basin of Africa value irrigation water to enhance agricultural productivity. Research in this area is important because soil degradation and sedimentation threaten the livelihoods of many populations in the region. Furthermore, mitigation measures require continual large investment costs both in terms of human capital and financial resources. The research encompasses the analysis of data collected from 210 randomly selected household heads in the Koga Watershed of the Upper Blue Nile Basin in Ethiopia. The research reported herein has two major objectives. The first objective is to explore the value of irrigation provided to households as an initial step towards the development of a payment for environmental services (PES) program. Under this broad objective, there are two specific goals. The first is to estimate households’ willingness to pay (WTP) to establish PES for upland soil and water conservation measures that ultimately reduce sedimentation loading in the newly constructed reservoir. The model results revealed that the aggregate expected WTP for the total of 7,000 hectares of irrigable land was 964,320 birr per year (9.65 birr equal $1 U.S.) with a household utility-maximizing price of 192 birr per hectare of irrigable land per year. The aggregate WTP was more than three times the annual budget allocated by the Koga Irrigation and Watershed Management project to reduce sedimentation loads (caused by upstream soil erosion) by 50 percent over the past 6 years. Thus, the aggregate expected WTP by downstream users has a potential to compensate upstream service providers and enhance resource use efficiency. The second major objective of this research is to examine the magnitude and determinants of labor supply behavior of farm households for the routine management and maintenance of irrigation infrastructure in the Upper Blue Nile basin of Ethiopia. For the total irrigable land area it is estimated that households could contribute an estimated 468,784 person labor days per year. This would meet more than 30% of the minimum annual labor requirement of the project for managing and maintaining of irrigation infrastructures. A logit model analysis indicated that households’ willingness to contribute labor was influenced by education, age of the household head, expectations about yields in irrigated agriculture, wealth of the household, involvement in off-farm activities, time taken to walk to the nearest market, the household’s dependency ratio and randomly assigned bid working days. Of these determinant factors, an intervention measures for managing and maintaining irrigation infrastructure through labor force participation should emphasize education about the likely benefits of irrigated agriculture. To increase labor participation particularly for new development projects, description of resource valuation scenario and future benefits should be clearly explained to farmers. Furthermore, the number of persondays allotted for conservation activities per hectare of irrigable land should take into account the high elasticity of households’ willingness to contribute for the randomly assigned bid working days.