The Economic Impact of Marena's Investments on Sustainable Agricultural Systems in Honduras

Abstract

This study examines the economic impact of sustainable agricultural production systems in Central America. In particular, we investigate the impact of investments promoted by the MARENA Programme in Honduras on the total value of agricultural production (TVAP) of its beneficiaries. Propensity Score Matching techniques along with the Difference-in-Differences framework are used to mitigate biases stemming from differences in observed as well as unobserved (time-invariant) characteristics between beneficiaries and a control group. The econometric estimates suggest that MARENA has had a positive and significant effect on the TVAP of beneficiaries. In addition, the analysis shows that, under alternative scenarios, MARENA yielded higher than expected internal rates of return. The results of this study shed light on the response of small-scale hillside farmers to economic incentives and lend support to the role of natural resource management projects in Central America as a tool to increase household income while also promoting the conservation of natural resources.