Social Welfare And Environmental Degradation In Agriculture: The Case Of Ecuador

A non-linear optimization model which maximizes total Ecuadorian social welfare, defined as the sum of consumers' and producers' surpluses for the four major crops (corn, bananas, rice and African palm) is developed to evaluate the tradeoff between welfare and environmental degradation in Ecuador. It was found that a total welfare loss of US$122 million (a 11 percent reduction - from US$ 1.112 billion to US$ 989.66 million) would be expected from a 30 percent reduction in the total pesticide load on the environment in the production of the four major crops. The distributional impacts of the welfare loss were found, however, to be significantly skewed toward the loss of consumers' surplus. Specifically, a 30 percent reduction of total pesticide load on the environment would result in a reduction of 3.86 percent of producers' total surplus while consumers would be expected to loose 19.46 percent of their total surplus.