Economics of soil erosion: case study of Ukraine

Purpose. The main objective of this paper is (і) to determinate the economic loss due to crop productivity loss caused by soil erosion in Ukraine, and (іі) to present the results of the econometric modeling of soil erosion impact on the efficiency crop production at the regional and district level. Methodology / approach. This study uses the following methods: expert assessments and monographic (for the assessment of economic losses due to crop productivity loss from spreading soil erosion); graphical (for building three-dimensional graphs); econometric modeling (to develop a mathematical model of the dependence of the gross crop production and income from sales per 100 hectares from the share of eroded arable land in its total area and production costs in crop industry per 100 hectares); abstract-and-logical (for generalization of the research results). To solve the assigned tasks, linear and quadratic econometric models (production functions) were developed using a dataset (і) from 168 observations (on the example of Ukrainian regions for 2010–2016) and (ii) from 189 observations (on the example of districts of Kharkiv region for 2010–2016). This study was conducted in order to test the hypothesis that the increase in the area of eroded arable land has a negative effect on the gross output of crop production. Results. Our expert assessment of economic losses due to crop productivity loss from spread of soil erosion on agricultural land in Ukraine is 224 mln USD. The obtained results confirm the hypothesis about the negative relationship between gross crop output and the level of land erosion. The obtained data confirm that an increase in the area of eroded arable land by 1 % leads to a decrease in the gross output of crop production by 0.20 % per 100 hectares of agricultural land in total, and in the third group of the studied subjects (the share of eroded arable land in their total area is more than 50 %) – by 0.61 %, respectively. Originality / scientific novelty. For the first time, linear and nonlinear (quadratic) econometric models were developed, which made it possible to carry out quantitative assessment of the impact of the soil erosion and the financial support (production costs in crop industry) per hectare on the formation of the financial results (gross crop output and income) of business entities in Ukrainian agriculture. The provision on the economics of soil erosion was further developed in terms of expert assessment of losses from this type of degradation and confirmation of the effect of the economic law of diminishing returns, which should be taken into account when developing measures for sustainable land management. Practical value / implications. The main results of the study can be used for the development, substantiation and implementation of soil protection measures for the sustainable use of agricultural land and/or to informed decision-making at different levels of management concerning restoration of eroded land.