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Economic Incentives for Entry and Exit in Gum Arabic Agroforestry System in Sudan

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  • Rahim, Afaf H.
  • van Ierland, Ekko C.
  • Wesseler, Justus

Abstract

The gum tree (Acacia senegal) in the Sahel-Sudan zone has many environmental benign functions. An important function is to control desertification. In this paper we analyze farmers' economic incentives to preserve the existing gum trees and their incentives to create new plantations using a real options approach. Results indicate that agricultural crops provide higher economic benefits as compared to gum agroforestry system. However, on the one hand, as gum arabic is produced during the dry period and land is abundant, there are low incentives for deforestation. Instead, farmers' tend to leave the land idle and let the tree growing. On the other hand, our results suggest that an increase in the prices of gum arabic of about 330 per cent is needed to induce entry and a shift in land use system from continuous agricultural production to gum agroforestry system.

Suggested Citation

  • Rahim, Afaf H. & van Ierland, Ekko C. & Wesseler, Justus, 2006. "Economic Incentives for Entry and Exit in Gum Arabic Agroforestry System in Sudan," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25720, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae06:25720
    DOI: 10.22004/ag.econ.25720
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    References listed on IDEAS

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    1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    2. Holden, Stein T. & Shiferaw, Bekele & Wik, Mette, 1998. "Poverty, market imperfections and time preferences: of relevance for environmental policy?," Environment and Development Economics, Cambridge University Press, vol. 3(1), pages 105-130, February.
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    Cited by:

    1. Xianlei Ma & Justus Wesseler & Nico Heerink & Futian Qu, 2013. "Land Tenure Reforms and Land Conservation Investments in China ¨C What Does Real Option Value Theory Tell Us?," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 19-33, August.

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