This thesis aimed at measuring the economic costs of soil degradation and to determine factors that influence the incidence and extent of adoption of soil conservation technologies by smallholder farmers in Malawi. A dynamic optimisation model was used to derive and analyse the optimal conditions for soil resource extraction and use in Malawi, while a selective tobit model was used to simulate the two-step decision-making process of farmers with respect to adoption of soil conservation technologies. Soil degradation has long-term consequences and static models, which form the bulk of studies that have so far been carried out in Africa on this topic, do not account for the inter-temporal dimension of optimal resource management. To deal with this shortcoming, this thesis used an inter-temporal optimisation framework, which considers soil in a time-dependent resource extraction perspective. This thesis has demonstrated that soil degradation is causing an enormous reduction in the productive value of smallholder land in Malawi. Current user cost of soil quality based on current practices of smallholder farmers, which represents annual loss in productive value of land, was estimated to be US$21 per hectare. Based on this value and land area under smallholder agriculture in Malawi, economic costs of soil degradation among smallholder farmers were estimated to amount to 14 per cent of the agricultural GDP. If left unabated, soil degradation threatens not only the future of smallholder agriculture but also, economic growth prospects of the nation. Although not operating on the SS optimal path in terms of soil resource management, current practices show that smallholder farmers in Malawi still consider, to certain degree, the dynamic costs in soil resource use. Hence, there is no strong evidence to suggest that current trends in land degradation are due to an institution failure (i.e., smallholder farmers have private incentives to conserve their soil resource). A result that suggests presence of other factors, most likely market distortions, behind existing deviations of farmers' practices from dynamic optimum. Government's serious support of the input and output market reforms is important not only to make the markets work but also, to make smallholder agriculture a profitable enterprise. It is only when smallholder agriculture becomes profitable that farmers can seriously invest in the soil resource. Agricultural support programs such as "food for work" if extended to include soil conservation, could lead to substantial curtailment of soil erosion since farmers can invest their labour in their own gardens during the critical times of land preparation. The sensitivity analysis indicated that increasing the discount rate to' 5%, SS solutions were close to current practice solutions. This suggests that one reason smallholder farmers are exploiting the soil resource is because they have a higher time preference. The high levels of poverty, especially among the smallholder subsistence farmers in Malawi, entail that farming households are more concerned with their survival now than their future well being. The study estimated an optimal output of 1.5tonlha and nitrogen fertiliser rate of 49 kg/ha at SS. The fertiliser estimates are based on smallholder farming system that incorporates soil conservation. In one of the most detailed studies on nitrogen use efficiency in Malawi, Itimu (1997) indicated that with the incorporation of manure, nitrogen fertiliser use dropped from 60 to 30 kg/ha to produce about 2.5 tons of maize. Malawi uses area specific recommendations for fertiliser application. However, using "best bet" technologies, at least 35kgN/ha is recommended for smallholder farmers on average. The SS optimum fertiliser estimated in the current study was somehow higher due to the fact that an inter-temporal framework, which considered the dynamic costs of soil nutrient extraction, was used. Results from fertiliser recommendation trials may be reinforced if researchers consider the inter-temporal nature and dynamic costs associated with the use of soil. The selective tobit model results indicate that factors that influence smallholder farmers' decisions to adopt soil conservation technologies may not necessarily be the same factors that influence subsequent decision on levels of adoption. The implication of this finding is that different policy prescriptions on soil conservation should strictly be guided by the goals the government wants to achieve. With fertiliser prices being out of the reach of most smallholder farmers in Malawi, soil conservation is one of the reliable options available to reduce soil degradation. However, any policy aimed at improving adoption of soil conservation technologies among smallholder farmers would succeed only if the various needs of smallholder farmers at the two decision stages are properly identified and addressed. / Thesis (PhD (Agricultural Economics))--University of Pretoria, 2006. / Agricultural Economics, Extension and Rural Development / unrestricted