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METHODS

Employment-based analysis: an alternative methodology for

project evaluation in developing regions, with an application

to agriculture in Yucata´n

Davis F. Taylor *

College of the Atlantic,105Eden Street,Bar Harbor,ME04609, USA

Received 24 August 1998; received in revised form 7 July 2000; accepted 7 July 2000

Abstract

Governmental and non-governmental organizations (NGOs) in developing regions increasingly recognize the links between sustainable development and environmental protection. For this reason, environmental protection efforts in these regions increasingly include sustainable community development projects. Unlike most traditional, large-scale development projects, the objective of such projects is to give local inhabitants sustainable economic alternatives to environmentally degrading activities, rather than to maximize the flow of discounted net benefits. The traditional method of project evaluation, cost-benefit analysis (CBA), does not provide useful information regarding the meeting of such objectives. The purpose of this paper is to introduce, discuss, and provide a brief example of employment-based analysis (EBA) as a means of project evaluation in developing countries. In contrast to the CBA approach of measuring a discounted flow of net benefits from economic options, EBA measures the number of jobs or population support provided by alternative activities using a given resource (typically land) over a given period of time. EBA better incorporates sustainability into project analysis by avoiding the use of discounting, directly linking project success with environmental sustainability, and penalizing economic activities that involve income inequality and income/capital flight. EBA is particularly illuminating when applied to small-scale sustainable development projects that are part of environmental conservation programs. After a brief description of the methodology, the motivation, strengths, and weaknesses of EBA are discussed. A simple application of EBA and CBA to alternative agricultural activities (traditional farming, improved farming, and cattle ranching) in Yucata´n, Mexico, is then provided. This analysis indicates that, while cattle ranching has a higher benefit-cost ratio, both traditional and improved farming provide more population support and greater contributions to sustainability. This example serves to highlight the potential benefits to using EBA instead of or in conjunction with CBA in developing regions, along with highlighting some of the strengths and challenges of EBA. © 2001 Elsevier Science B.V. All rights reserved.

Keywords:Employment-based analysis; Cost-benefit analysis; Sustainability; Yucata´n

www.elsevier.com/locate/ecolecon

* Tel.: +1-207-2885015, ext. 202; fax:+1-207-2884126. E-mail address:[email protected] (D.F. Taylor).

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1. Introduction

Cost-benefit analysis (CBA) has emerged in the past three decades as the method of choice for evaluation of development projects in devel-oping regions (Kirkpatrick and Weiss, 1996). Despite its popularity, however, CBA is the target of considerable reformation (see, for ample, Jenkins, 1997) and criticism (see, for ex-ample, Schwartzman, 1986). The purpose of this paper is to suggest and provide a brief example of what I have dubbed employment-based anal-ysis (EBA) as a complementary or alternative methodology for project evaluation in develop-ing countries.

In contrast to the CBA approach of

measur-ing a discounted stream of net income/benefits,

EBA evaluates economic activity on the basis of the amount of employment generated or popula-tion supported by each project, activity, or de-velopment path over a period of time using a given amount of underlying resources. While employment has been long a concern in devel-oping regions (Todaro, 1994; Goodstein, 1999), and there has been some limited analysis of em-ployment in developing regions, CBA continues to be the dominant method of project evalua-tion, and net income continues to be the cur-rency by which projects are appraised. While EBA clearly captures employment effects more directly than does CBA, the main argument for promoting its widespread use is that it also bet-ter incorporates sustainability into project evalu-ation. EBA is particularly illuminating when used to analyze sustainable development in the context of environmental preservation projects in developing regions.

The next section introduces EBA methodol-ogy. Section 3 briefly discusses both EBA and CBA in terms of accounting for sustainability,

and explains the motivation, most illuminating

contexts, and drawbacks of EBA.1 _{Section 4}

provides an application of EBA to alternative economic activities in Yucata´n, Mexico. Section 5 offers conclusions and suggestions for future research.

2. EBA methodology

The basic notion of EBA is to count the number of jobs an economic activity provides,

or how many people (families) it supports, o6er

a gi6en period of time, over a given resource

(typically land). Like CBA, EBA can be quanti-tative, qualiquanti-tative, or a mixture of both types of analysis, depending on the needs of the policy-maker and time, resources, and data available. For example, EBA could consist of job-based measures denominated in ‘job years per 1000 ha’ or ‘jobs per quarter century per ha,’ or if data were more limited, a qualitative discussion that

examines the employment/population support

needs and provisions of a given region under alternative projects or activities.

In the case of quantitative analysis, the objec-tive of EBA is to provide numerical measures of sustainable employment. What constitutes ‘em-ployment’ and a full-time ‘job’ would be defined by local standards. A ‘job year’ represents em-ployment for one person for 1 year; measuring economic activity using job years would consist of totaling the number of job years provided by the activity or path over a certain period of time such as 25 years, over a given measure of land. So, for example, EBA in this context might involve comparing the number of people who can work 1000 ha of land doing alternative economic activities such as cattle-raising, subsis-tence agricultural, traditional timber harvesting, or low-impact timber harvesting, over a period of 25 years. Some activities might have many jobs in the first part of the 25-year period and then provide less employment in the latter part of the period; other activities might provide fewer jobs, but be a source of more

sustain-able employment and thus result in a

1_{This discussion is necessarily limited. Entire texts are} dedi-cated to esoteric concerns regarding CBA and welfare econom-ics. Similar discussions, unfortunately, are beyond the scope of this article; hopefully such texts will be eventually written about EBA.

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higher overall number of job years. If a given project involves combinations of activities, the job years for each activity could be calculated, then summed over the entire area and life of the project. An important feature of EBA is that as certain activities give way to other activities over time (e.g. cattle raising shifts to goat raising, as pasture becomes poorer), job years would be calculated for each expected activity over the chosen time period. A broader, but still quantitative, approach would

be to compare economic activities and/or

develop-ment projects in terms of population support, i.e. the number of people supported by the activity on a given measure of land or other capital investment. Accounting would be similar to job-years, but instead of only analyzing workers involved in the given activity, this measure would also incorporate the workers’ families. This approach recognizes the complexity of household economic organization in developing regions and helps overcome the associ-ated measuring difficulty often encountered in project analysis in such regions. In fact, while the discussion in this section is in terms of ‘jobs’ (largely for ease of exposition), the application in Section 4 is in terms of population support.

The choice of time period should reflect the tension between the incorporation of sustainability and uncertainty. A longer time period incorporates greater consideration of sustainability, but is also more subject to mismeasurement arising from in-creased uncertainty surrounding economic and non-economic events over the time period; the reverse holds true for shorter periods. Uncertainty in CBA is usually recognized via sensitivity

analysis2 _{(Boardman et al., 1996); a similar}

ap-proach could be adopted as a component of EBA.

3. Sustainability, CBA and EBA 3.1. Capturing sustainability

Definitions of sustainability are numerous and varying (Toman, 1992). For the purposes here, let

a sustainable project, economic activity, or devel-opment path be one in which the standard of living for people in a given locality or region is no worse for future residents than it is for current residents

(adopted from Goodstein, 1999).3

The use of CBA in practice often ignores sustain-ability in several ways (Toman, 1992; Costanza et al., 1997). The methods of discounting used in CBA tend to ignore any sustainability constraint and are biased toward the current generation unless current net benefits can successfully be reinvested to benefit future generations, often not a realistic possibility in developing regions. Sustainability considerations are present in most texts on CBA (see, for example Johansson, 1993; Hanley and Spash, 1993; Layard and Glaister, 1994), but appear to be finding their way into application much more slowly. de Janvry et al. (1995) demonstrate the incorporation of sustainability into a CBA, but admit that, for example, limited access to capital can prevent successful implementation of activities deemed op-timal by CBA. Quite often reinvestment opportuni-ties, as imagined in the context of the theory of discounting, are not available or are unlikely to be realized due to institutional realities in developing regions.

3_{The main competing type of definition of sustainability} centres on the maintenance of human and natural capital stocks (see, for example, Pearce and Atkinson, 1993). Assum-ing the purpose of maintainAssum-ing capital stocks is to provide a nondecreasing standard of living, the distinction should not make any critical differences in the following discussion. Han-ley and Spash (1993) provide a comparison of definitions. Additionally, while sustainability involves no declinein stan-dards of living, sustainablede6elopmentwould certainly imply

an improvement of standards of living. What constitutes ‘de-velopment’ is a complex and contentious issue that involves much more than employment and is beyond the scope of this paper. At a minimum, ‘sustainability’ as defined here would be a necessary, but probably not sufficient condition for ‘sustain-able development’. Thus, while ‘sustain‘sustain-able development projects’ are referred to extensively, the discussion of the merits of EBA is in the context of ‘mere’ sustainability. See also footnote 4.

2_{Sensitivity analysis refers to exploring how evaluation} re-sults change given changes in the assumptions that are used in the evaluation.

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Traditional CBA also gives no indication of

who benefits from the economic activity under

consideration. Developing regions are subject to high degrees of income inequality and capital flight (Todaro, 1994). Thus, it is quite possible

that a significant amount of themonetarybenefits

of a development project will not accrue to a broad base of regional inhabitants. In such a case, evaluating projects via discounted flows of net income will not give a good indication of whether the project is actually maintaining a given stan-dard of living for the people affected by the project. Additionally, CBA also masks whether a given economic activity will aid development via protecting environment services and facilitating their sustainable use, and does not indicate if the activity will protect the environment by providing people with alternatives to environmentally de-grading activities. In a larger sense, CBA assumes that the normative criteria for any economic ac-tivity, project, or development path is the maxi-mization of the net (discounted) stream on income; as described below, this often is not even the goal of small-scale development projects linked to environmental preservation in develop-ing regions.

The case for EBA as an illuminating method of project appraisal is most obvious when it is ap-plied to development projects that are part of an overall environmental protection program. EBA can be used to compare between two or more such projects, but it is especially illuminating when such projects are alternatives to larger-scale, more traditional, capital intensive, and potentially unsustainable development activities. There is in-creasing recognition of a strong relationship

be-tween sustainable development and local

environmental protection in developing regions. The linkage between environmental protection and sustainable development goes in both direc-tions: sustainable development is necessary for environmental protection, in that people living in poverty are often forced to degrade the very envi-ronment upon which they depend (Goodstein, 1999), and environmental protection is a neces-sary component of sustainable development, in that healthy environments provide essential re-sources for sustainable economic activity (for

ex-ample, Panayotou and Ashton, 1992; Repetto, 1998). As a result, governments and non-govern-mental organizations in developing regions are increasingly integrating sustainable development

and environmental protection (for example,

Gregersen et al., 1989; Panayotou and Ashton, 1992; Goodstein, 1999). The structure of bio-sphere reserves is specifically in recognition of the link between sustainable, poverty-reducing eco-nomic activity and environmental protection (Wells and Brandon, 1992).

It is out of this context that the idea of EBA was developed. If the goal of a (usually small-scale) development project is to give local

inhabi-tants sustainable economic alternatives to

environmental degradation, why not use a mea-sure that relates directly to the goal? The vast majority of times, CBA simply does not evaluate how successful such a project might be in meeting its objectives, and can make such projects appear suboptimal relative to other development options.

The goal of such development projects usually is

not maximization of the discounted stream of net

income or benefit, so in addition to masking the link between sustainable development and envi-ronmental protection, CBA can be an obscuring means of evaluation. Estimating the number of jobs a given activity or path will provide over 25 years (for example), on the other hand, explicitly incorporates sustainability by measuring the de-gree to which workers or families will have means

of support into the foreseeable future.4 _{If an}

activity provides high ‘up-front’ employment, but is based on unsustainable activities that will de-cline within a foreseeable time, a time horizon can (and should) be chosen that will capture the trend, and in terms of EBA, the activity or path will 4_{The degree to which ‘having means of support’ equates to} non-declining welfare (required for sustainability by the defini-tion employed here) is foremost dependent on the way that ‘a job’ is defined. It is assumed that a job only counts if it does not involve a decline in the current acceptable standard of living. A similar point holds for population support. On the other hand, EBA purposefully gives no extra weight to jobs that provide substantiallymorepay or welfare. This prevents the improvement of one subgroup from masking (in terms of accounting) declines in welfare in others. Relaxation of this assumption is discussed in Section 5.

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look less attractive. If the goal of a given (perhaps

larger) project is not sustainable development in

the context of environmental protection, EBA can be a powerful tool to illuminate project

shortcom-ings in these dimensions.5

The use of discounting is both problematic and unnecessary in the context of EBA. Technically, it might be possible to conceive of discounting job-years or population support to present values, so that, for example, job gains in the future could be devalued to reflect the time preference of current economic agents in the same way as is done with net income in CBA. But ‘jobs’ are not a store of purchasing power; they cannot practically be ‘banked’ or directly reinvested and indirect ‘rein-vestment’ would seem to require serious methodo-logical convolutions. It would serve little purpose to try to ‘transfer’ jobs, say, from the current generation to future generations in the interest of sustainability. For a project that targets a given group of people at a given location, discounting and/or transferring jobs over a time line or across generations is contrary to the general notion and purpose of sustainable development.

Furthermore, the intergenerational equity that is inherent in sustainability is better captured without the use of discounting. Employment or population support counts the same whether it is at the beginning or the end of the time period. The analysis of benefits is thus blind to which generation is receiving the benefits.

3.2. Beyond sustainability

There are additional reasons beyond the need to incorporate sustainability into project analysis for considering EBA as a complement or substi-tute for CBA. First, employment itself matters significantly in the development process (UNIDO, 1972; Todaro, 1994). For this reason, EBA could

also find application (in one form or another) in any type of development project.

Measuring employment as part of project eval-uation in developing countries also can be seen as a means of addressing equity issues. UNIDO (1972) points out that ‘…the desirability of em-ployment in the context of (developing) countries may be due mainly to its redistributional impact’. The authors in particular note the possibility that employment could be targeted toward women as a means of redistribution and ‘modernization’. They also note that redistribution via employment is less likely to be marred by corruption than direct subsidization of incomes.

EBA is also consistent with ideas and proposi-tions forwarded by some of the harsher critics of

standard neo-classical development theory.

Trainer (1990), for example, argues that the con-ventional approach to development that relies on market forces and growth maximization has not only failed people, but has also been responsible for serious negative environmental impacts. ‘Ap-propriate and ecologically sustainable develop-ment’ requires, amongst other things, a focus on local economic self-sufficiency and independence from global economic forces. The use of EBA does not guarantee such a focus, but the emphasis on employment over income is more consistent with the approach Trainer (1990) calls for, and better captures the benefits of projects that em-phasize these features rather than projects that emphasize simple income growth.

3.3. Weaknesses of EBA

Of course, EBA would not be an ideal method of project evaluation in all circumstances. Because EBA is not denominated in monetary values, it

does not capture monetary effects that do not

translate into regional employment or population support. While the motivation for the develop-ment of EBA was in the context of small-scale, sustainable development projects where monetary effects are minimal, these projects sometimes ‘compete’ with larger-scale, capital intense, ‘tradi-tional’ development projects that have significant monetary goals and effects, and in such contexts EBA should be considered a complementary, 5_{It is worth noting that EBA only evaluates environmental}

protection indirectly and to the extent that it is necessary for sustainability. Ideally, all projects should have separate analy-ses conducted along all dimensions of concern, especially analysis of environmental impact. It seems likely, however, that widespread adoption of EBA would lead to increased environmental protection.

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rather than substitute, form of analysis. A consid-erable concern for CBA researchers and practi-tioners in international agencies (e.g. the World Bank), for example, is capturing a (usually large-scale) project’s impact on national net income, net exports, and labor markets, each a vital concern at the national level in developing countries. EBA would not be as effective as CBA at capturing these effects.

However, the degree to which this is a ‘weakness’ of EBA depends on one’s perspective. Many would argue that such projects should also be analyzed in terms of regional sustainability, regardless of whether they are ‘competing’ with projects dedi-cated to regional sustainable development. The ‘appropriate’ method of project evaluation largely

depends on what a projectis meantto achieve (e.g.

export earnings) and what it oughtto achieve (or

at least not fail at, e.g. sustainability). This relation-ship holds for many of the issues discussed in this section: EBA is ‘less appropriate’ as a stand-alone method of analysis to the extent that a project has goals related to and/or impacts on variables other

than regional sustainable development.6_{Given the}

importance of sustainability, one might argue that (assuming the necessary resources were available) CBA be conducted for large projects involving significant monetary goals and effects, but that EBA be conducted for all projects.

In addition to the effects noted above, EBA is not as well-suited as CBA for capturing the effects of projects that involve considerable amounts of money in terms of both project funding and rev-enue generation. For small-scale projects, however, these impacts can be assumed to be negligible. In Yucata´n, for example, sustainable development projects that are part of an environmental protec-tion program usually involve relatively small capi-tal outlays that peasants are expected to pay back;

revenues are not expected to be greater than that necessary to support the family, which is accounted for in EBA. Similarly, EBA is most illuminating in the context of projects whose effects on market-wide wages are negligible. In most circumstances where sustainable development projects are ini-tiated, labor is drawn from an excess labor pool resulting from a non-clearing market wage, so negligible wage impacts would be the most com-mon situation.

Even in cases where a project or development path requires a significant capital outlay, has non-negligible effects on wages or significant export earnings, or produces other monetary effects, the extreme importance of sustainability and employ-ment in developing regions suggests that EBA still be used in conjunction with CBA. EBA could be modified in several ways to account for monetary effects. For example, for project options that in-volve significant up-front capital expenditures,

job-years per dollar (or thousands of dollars, or

thousands of pesos, etc.) can be calculated for each option. Another approach would be to make all options subject to the constraint that cash outlays be recouped in a given period of time; only options meeting these criteria would be subsequently sub-jected to EBA. Such approaches would also be necessary in situations where more cash outlays could simply ‘buy’ more employment, which would

presumably not be a sustainable situation.7 _The

ability to make these sort of asssumptions concern-ing capital expenditures, wage effects, export earn-ing, etc., are, to a significant extent, why EBA is most appropriate in relatively less-developed re-gions; such assumptions would be much more questionable for analysis of a project in a highly

developed region.8

7_{I am indebted to an anonymous referee for raising this} point. Not all activities that can be analyzed via EBA involve external funding, and in the absence of such funding, EBA contains a profitability constraint, in that unprofitable activi-ties will not continue over the period of analysis.

8_{Where more data are available, input}_/_{output (I}_/_{O) analysis} can be used to calculate employment effects of various alterna-tive economic activities or paths. I/O requires considerably more data than either EBA or CBA; these data are less often available for developing regions or the organizations that work in them.

6_{This point regarding very different objectives and} out-comes of competing projects and activities is further addressed below in the context of supraregional ‘employment externali-ties’. The relative importance of various criteria for evaluating projects is controversial (see, for example, Goodstein 1999) and likely to depend on fundamental beliefs concerning devel-opment processes and objectives. The political economy of development and its relationship to EBA is discussed in Sec-tion 5.

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Externalities can pose a challenge for EBA. As

with CBA, EBA should try to capture all of the

impacts of a given project or development path. Externalities such as those related to environmen-tal degradation tend to be thought of in terms of monetarycost/benefits, but there is no reason they

cannot also be considered in terms of job (or

population support) costs/benefits. Local ‘employ-ment externalities’ (direct and indirect job losses or gains to people not directly involved in the project or activity under analysis) may require significant amounts of information regarding long-term impacts, but no more so than for CBA. Even if the impact of externalities such as envi-ronmental degradation are not initially in the form of jobs, they will usually lead, within the time period used in the EBA, to employment effects. An agricultural activity, for example, that leads to non-point pollution via the runoff of pesticides will likely eventually lead to employ-ment loss, possibly (for example) among fishers due to contaminated fishing grounds. Employ-ment externalities at higher levels also can be incorporated into the analysis, although probably with some difficulty. While the type of projects for which EBA is most illuminating are unlikely to generate supraregional employment effects, com-peting activities (e.g. cattle ranching) could

con-ceivably create more supraregional employment

than local employment.9 _{Deciding ‘who counts’}

(standing) is inherently subjective and con-tentious, as Boardman et al. (1996) point out in the context of CBA. Ideally, all of these effects could be accounted for, but in reality EBA is likely to emphasize local and regional

employ-ment over supraregional employemploy-ment and other supraregional effects. However, in a similar vein as the monetary effects discussed above, and given the definition of substainability used here (focus-ing on local and regional residents), the local/

re-gional emphasis may actually be appropriate.10_In

any case, because the data necessary to perform complex analysis of supraregional impacts are rarely available at the regional level in developing countries, there is little expectation amongst prac-titioners or users that they be incorporated for EBA and CBA. Put another way, EBA may be considered ‘appropriate technology’ for project evaluation in developing regions. Local popula-tion support externalities are considered in the application below, but supraregional externalities are not.

Development projects can also have other sig-nificant external costs and benefits that are very difficult to capture in terms of employment. In particular, environmental economists currently dedicate considerable effort toward devising ways

to place a usefully accurate monetary value on

national and global externalities, especially those that result from option and existence value. The validity of such accounting is controversial (Har-ris, 1995; Costanza et al., 1997), and is perhaps even more problematic in terms of EBA. The accurate expression of such values in terms of jobs, job years, or population support would be extremely difficult. This may not, however, leave EBA much worse off in terms of its appropriate-ness as a method of project evaluation; the reality is that supraregional externalities are rarely

con-sidered in policy implementation in developing

regions. It is, of course, for this reason that the world’s tropical forests and other extremely globally valuable resources are disappearing at an alarming, and what is surely Pareto suboptimal, 9_{I am indebted to an anonymous referee for raising this}

issue. One might argue that even if supraregional employment externalities are created, local employment should ‘count for more’ if, for example, the project results in considerable envi-ronmental protection. Such a consideration would implicitly involve distributional weighting, which was suggested in the context of CBA in developing regions by Little and Mirrlees (1974). Distributional weights, such that regional employment counts for more than supraregional employment, could be used explicitly, although doing so opens up the analysis to a much greater degree of subjectivity. This issue is discussed in the context of CBA in Kirkpatrick and Weiss (1996).

10_{For both CBA and EBA, the choice of (spatial) level of} analysis involves equity considerations because of aggregation. If analysis is at the regional level, subregional ‘winners and losers’ are lost through aggregation; if analysis is at the national level, then aggregation does not distinguish winners and losers at the regional level. See Pearce (1994) for a discussion of ‘sustainability requirement boundaries’. It would be appropriate for any EBA discussion to note at the outset what spatial perspective the analysis maintains.

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rate.11_{Perhaps the best perspective is to recognize} that EBA is better at evaluating regional impacts of various projects, whose implementation is often in the name of sustainable development and envi-ronmental protection that almost certainly pro-vides positive net benefits at the supraregional level.

Because of these potential weaknesses of EBA,

it would be premature to abandon CBA as one

methodology to be used in project evaluation, and the intention of this paper is not to suggest that EBA should be the sole means by which develop-ment projects are evaluated. Kirkpatrick and Weiss (1996) call for a ‘mixed team approach,’ pointing out that ‘‘…there will be certain types of projects which should be seen in terms of the achievement of a set of objectives, which cannot be converted readily into the monetary numeraire of conventional appraisals.…’’ By emphasizing employment, equity, and most importantly, sus-tainability over the maximization of monetary net benefits, EBA can be part of the cultural shift inherent in the ‘methodological pluralism’ that Norgaard (1989) argues is necessary for ecological economics.

4. An application 4.1. Background

Some of the benefits and challenges of EBA are illustrated in the following application of the anal-ysis to alternative economic activities in Yucata´n, Mexico. While the data employed are rudimen-tary, they are sufficient for rough calculations that permit comparison between the results achieved

from EBA and CBA for alternative activities.12

Agriculture on the Yucata´n Peninsula is charac-terized by a high degree of subsistence farming. There are approximately 170 000 agricultural units on the peninsula, 95% of which are tradi-tional farm units. These units employ in the

neighborhood of 800 000 campesinos (peasant

farmers and their families), approximately 35% of the total population of the peninsula (Cuanalo de la Cerda, 1995). Subsistence farming in the area

uses the traditional Mayanmilpasystem, a diverse

production system the center of which is rota-tional, ‘slash-and-burn’ agriculture. Corn fields (intercropped with beans and squash) of approxi-mately 2 ha are cleared from surrounding forests via slash-and-burn. Fields are usually used for a period of 2 years, then allowed to revert back to forest. Historically, the rotation period in the milpa system was 16 – 25 years, leading to suffi-cient and sustainable productivity (Teran and Rasmussen, 1994). However, recent population increases combined with conversion of large areas to pasture for commercial cattle production is cited as the primary factor for a shortening of rotation periods to 6 – 8 years, leading to de-creased productivity, inde-creased labor require-ments, and poor nutrition in campesino families (Cuanalo de la Cerda, 1995). Effects on forest health, productivity, and biodiversity have not been studied, but it seems safe to assume that the effects have not been positive. Even though it is no longer strictly practiced, ‘traditional milpa’ with a historic rotation period of 20 years is analyzed below, largely for illustrative purposes, but also based on the conjecture that it is more sustainable than the cattle ranching that has influ-enced its demise.

The Yucatań Peninsula is also the location of several biosphere reserves. Apart from official designation, these reserves receive very little direct governmental funding, and are instead managed primarily by two NGO’s, Pronatura Penıńsula de Yucatań and Amigos de Sian Ka’an. Both groups support small-scale projects within the biosphere reserves as part of their overall environmental conservation programs (Morales, 1995; Pronatura Penıńsula de Yucatań, 1995). In particular, Pronatura sponsors ongoing efforts in the Calak-mul Biosphere Reserve to foster sustainable devel-11_{This is, of course, because the developing countries in}

which much of such resources are located are poor. Incorpora-tion of global positive externalities into local policy implemen-tation represents a transfer from the developing region to the rest of the world that developing regions, by definition, can ill-afford. Overcoming this transfer (through compensation) is an equity matter that is independent of both EBA and CBA. 12_{The data used to calculate figures presented here are} available from the author.

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opment that will slow incursions into some of the last moist tropical forests on the Southern Yu-cata´n Peninsula; examples include aquaculture projects, the use of ‘improved milpa’ and eco-tourism projects, along with educational efforts. Cuanalo de la Cerda (1995, 1996a) are studies of ‘improved milpa’ techniques. They examine the effects of improved technology and investment on milpa productivity, with an eye toward reversing downward trends in campesino nutritional levels and rotation periods, and eliminating the burning of fields as part of the rotational structure of milpa agriculture. Cuanalo de la Cerda (1996a) shows that it is possible, using improved technol-ogy (fertilizers, limited herbicide use, nitrogen-fixing legumes, animal husbandry) and modest investments, to make these milpa units sufficiently productive to raise nutritional levels to an accept-able level. These efforts provide a rich context for the application of EBA, and investigation into their successes and challenges was the impetus for the development of the methodology, so improved milpa is also analyzed below.

and fodder from ramon trees (Brosimun alcas

-turm). Supplementary fodder is purchased at

times by most ranches, usually during extended drought years, although at the time of the study, Santos and Anderson (1995) found that 73% of the ranches in their sample had not purchased supplementary fodder in the previous 12 months. Some cattle are pastured on a single field continu-ously, but most are rotated. The majority (79%) of ranches burn their fields annually to discourage unwanted grass and bush species (Santos and Anderson, 1995), so rotation is to permit recovery of grasses, not full forests. There are several rea-sons why cattle ranching masks an appropriate choice of alternative to milpa in the application of EBA. First, cattle ranching is widely cited as being associated with large scale deforestation in

the neotropics (see, for example, Parsons, 1993; Schelhas, 1996; Moran et al., 1996), and thus is an indirect cause of environmental degradation. Ad-ditionally, cattle ranching uses relatively little labor, and this is more likely to produce illumi-nating findings using EBA relative to CBA. 4.2. Employment-based analysis

While no specific project in Yucata´n has yet to

use EBA ex ante, several researchers have

gath-ered data that permit use of both EBA and CBA methodologies in the evaluation of two forms of

milpa agriculture and cattle ranching.13

EBA of the milpa is the most straightforward. Cuanalo de la Cerda (1996a) uses a sample con-sisting of 34 volunteer families from the commu-nity of Yaxcaba´. Because all members of the family, other than the very young and very old, work in one or more components of the milpa, population support (as opposed to jobs) is the appropriate unit of measure. Family size averages 6.73 members per family. Each family requires 2 ha of corn/bean/squash fields every 2 years; as-suming a rotation period of 20 years, a family requires 20 ha for fields. Home garden and living space sizes vary, but a liberal estimate would be 1

ha.14 _{Thus, a family requires 21 ha to sustain it}

indefinitely. Using an arbitrary measure of 100 ha as a land base, we arrive at a figure of 32.05 people per 100 ha per year. Since this method of production is sustainable indefinitely, our choice of time period is arbitrary. Using 20 years as a time base, we arrive at 641 people-years over the 20-year period. This is the fundamental figure to be derived from a typical EBA.

‘Population support’ externalities are probably a net positive through the maintenance of forested areas that are between field use and used for

13_{I am extremely grateful to Dr Heriberto Cuanalo de la} Cerda of Centro de Investigaciones y de Estudios Avanzados (CINVESTAV), Merida, and Luis Araujo Andrade of the Facultad de Economı´a, Universidad Autonoma de Yucata´n (UADY), for graciously providing me with data from their studies.

14_{No rotation is required for home gardens and living} space.

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hunting and gathering (Teran and Rasmussen, 1994), but are assumed to be negligible for the purposes of the analysis here. Note, however, that at any one time 85.72 ha out of our arbitrary 100 ha is in forest or forest regeneration. Campesinos do earn income both through the sale of some excess production and temporary migration to urban areas for the purpose of day laboring (Cua-nalo de la Cerda, 1996a). The population-sup-ported figure captures the benefits of these activities to the families themselves. Given the excess production levels of citrus and surplus labor in the region, influence of these activities on the regional economy may not be completely negligi-ble, but is probably quite small and safe to ignore. Under the improved milpa system and assuming an 8 year rotation, a family requires only 9 ha of land to support it indefinitely; using all of other assumptions above, a project of improved milpa leads to 74.78 people-years per 100 ha, or 1496 people-years over the 20-year span.

While improved milpa involves a degree of up-front investment, farmers in Cuanalo de la Cerda (1996a) were able to pay back all loans within several years; excess production thereafter accrued to that family and led to improved nutri-tion. Population support externalities are of a slightly greater concern in the improved milpa system. The use of fertilizers, and in particular herbicides (Gramoxone), may have negative exter-nalities and in a longer period of time prove to be unsustainable. Gramoxone is a form of the herbi-cide paraquat, which is highly toxic to humans (orally, dermally, and via inhalation), birds, and crustaceans; its persistence qualities are unknown (Briggs and Staff of the Rachel Carson Council, 1992). Plants are relatively slow to develop resis-tance to herbicides, but at least one study found limited strains of weeds resistant to paraquat (Ra-dosevich, 1983). However, Cuanalo de la Cerda (1995) tracks production levels for a single farm in Campeche using an improved milpa system, in-cluding the use fertilizers and herbicides, over an 11-year period and finds no declines in productiv-ity. The lack of surface water in Yucata´n also lessens the degree to which herbicide use can contribute to non-point source pollution. Many researchers increasingly recommend the use of

integrated pest management (IPM), in which non-pesticide pest control is favored and employed first, but does incorporate the use of pesticides in extreme cases (Postel, 1987; Lerner, 1997). It is not clear whether pesticide use in the Cuanalo studies was part of an IPM. However, a primary purpose of the use of fertilizers and herbicides in improved milpa systems is to eliminate field burning; given that field burning produces a host of negative externalities that could influence population sup-port, fertilizer and herbicide use may be no worse than the alternative. In a larger sense, nonetheless, the introduction of such methods may seem coun-ter to sustainable development. Given current po-litical and economic trends in Mexico, however, the limited use of fertilizers and herbicides seems to be an important part of raising nutritional levels to an acceptable level. Given the lack of information, assume for the calculations here that the limited herbicide and fertilizer use poses no significant negative population support externali-ties and no negative impact on sustainability; if this were an actual full-scale EBA, more data and sensitivity analysis would be highly desirable.

Turning to cattle ranching. Santos and Ander-son (1995) divide the ranches in their sample into small ranches (1 – 40 head of cattle), medium (41 – 160 head), and large (161 – 2000 head), and find that each stratum exhibits different characteristics in terms of importance of cattle ranching as a source of income, field rotation methods, supple-mentation of fodder, and other features. In partic-ular, they find that larger ranches are more dependent on cattle ranching as a source of in-come (as opposed to smaller ranches where families and workers may earn income off the ranch). This feature suggests that data from the large ranch strata are most appropriate to use in order to isolate cattle ranching as an economic alternative to milpa. Furthermore, the government policy encouraging large ranches makes the large ranch strata the most appropriate in terms of

policy analysis.15 _{The larger ranches also tend}

15_{The fundamental findings of EBA of cattle ranching} presented below, however, do not differ greatly amongst all three stratum.

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to use labor more efficiently, which should further highlight distinctions between the results of EBA and CBA.

The large ranches in Santos and Anderson (1995) consist of an average of 545 ha. According to Cuanalo de la Cerda (1995), many of these

large ranches are managed by overseers (encar

-gados) for absentee landowners, so that there is probably a considerable amount of local and re-gional capital flight. The numbers in Santos and Anderson (1995) support this contention, as they find that the average large ranch maintains 0.5 non-salaried (family) workers. This labor is sup-plemented by an average of 2.6 fixed salary work-ers and 5.1 conditional workwork-ers. Ranch ownwork-ers support a total of 7 family members on average, while the figure of 6.73 obtained from Cuanalo de la Cerda (1996a) is used for salaried workers, and conditional workers, and conditional workers are assumed not to have families or obtain their primary support from off the ranch.

The sustainability of these ranches (and there-fore whether or not cattle raising might give way to other activities over the 20-year period of anal-ysis) is mostly a matter of conjecture. While ranching has been active on the peninsula for centuries, Cuanalo de la Cerda (1995) claims that the burning of fields is leading to desertification, although there have been no formal studies con-ducted. While few ranches use fertilizers, pesti-cides, or herbicides (Santos and Anderson, 1995), one would have to believe that the massive burn-ing of fields in a dry tropical environment with poor soils would lead to declines in productivity. These conjectures notwithstanding, let us use the most optimistic assumption that large ranches in Yucata´n have sufficient land to rotate their cattle in such a fashion that production in sustainable indefinitely and does not produce significant local population support externalities. Using the same 20-year period as was used with milpa, we obtain the figure of 5.48 people per 100 ha, or 109.62 people-years over 20 years.16

4.3. Benefit-cost analysis

Traditional milpa on a 20-year rotation is rarely, if ever, actually practiced, so that CBA is

not available for that development option.17

Re-garding ‘improved milpa,’ Cuanalo de la Cerda (1995) calculates a benefit-cost ratio of 1.54 for an integrated milpa system, while the best combina-tion of fertilizers, nitrogin fixing legumes and no field burning in Cuanalo de la Cerda (1996b)

results in a benefit-cost ratio of 1.93.18 _These

studies were relatively simple in nature; for exam-ple, they did not incorporate any effects of exter-nalities, impact on wage levels, or non-monetary costs and benefits. They also assume a wage rate of 15 (new) pesos per day, which may be some-what optimistic, given the high levels of unem-ployment in Yucata´n.

Benefit-cost data are extremely limited for cattle ranching in Yucata´n. Araujo (1995) collected data over 3 years at a single ranch in Yucata´n. His data result in a benefit-cost ratio of 2.12. As with CBA on improved milpa, data on externalities, wage effects, and non-monetary costs and benefits were not collected. Thus, while studies for both types of production are somewhat incomplete Table 1

EBA and CBA for alternative agricultural activities, Yucata´na

EBA, people-years for CBA, 100 ha, 20 years benefit-cost

ratio

Traditional 641 –

milpa

1.54 1495.6

Improved milpa

Cattle ranching 109.6 2.12

a_{Sources, Araujo (1995), Cuanalo de la Cerda (1996a,b).}

17_{Cuanalo de la Cerda (1996a) reports a cost-benefit ratio} of 0.64 for unimproved milpa using the 6 – 8 year rotations.

18_{Note that this is just for the corn-bean-squash field} com-ponent of the ‘improved milpa’. Cuanalo de la Cerda (1996a) reports cost-benefit ratios greater than one for all other com-ponents (fruit and vegetable production, pig and chicken production, apiary) of the improved milpa system.

16_{If part-time workers are supporting full families with their} labor on cattle ranches, the resulting figures are 10.89 people per 100 years, or 217 people-years per 100 ha.

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(and over small sample size), they are suitable for comparison.

4.4. Analysis of findings

The calculations derived above are summa-rized and presented in Table 1. The findings highlight the value EBA: using just monetary benefits and costs (CBA), cattle ranching ap-pears to be a more profitable economic enter-prise in Yucata´n. But because it uses large quantities of land and relatively little labor, cat-tle ranching supports a relatively small popula-tion on a given measure of land. To the extent that a (sustainable) development project is to provide local people with alternatives to envi-ronmentally degrading activities, or greater em-ployment opportunities in general, traditional milpa should be preferred to cattle ranching, and improved milpa should be preferred to tra-ditional milpa.

Despite the figures obtained, a number of as-sumptions made in these calculations probably lead to a masking of the full analytical potential of EBA as described in Section 2 above. In par-ticular, the assumption that a cattle ranching is fully sustainable over 20 years seems very opti-mistic, even in the case of large ranch optimally rotating its fields. More likely, the representative 100 ha in the case of cattle ranching would not stay as productive over the course of 20 years, and alternative economic activities would take place on it, most likely in the course of the land returning to forest. This would result in even lower figures for people – years in the case of cattle ranching. Similarly, it is possible that the use of fertilizers and herbicides in the improved milpa system could have a negative effect on population support over the course of 20 years, resulting in lower person – years for that option. Resolving these uncertainties could be done through obtaining more data, or calculating multiple figures for each option based on a vari-ety of different assumptions.

The figures in Table 1 also demonstrate EBA’s usefulness in analyzing different overall

economic activities (as opposed to specific

projects). The analysis suggests that if Mexican

policymakers are concerned about sustainability, increased employment for the poor, and a more equitable distribution of income, they should promote traditional milpa over cattle production and improved milpa over traditional milpa.

5. Conclusions and suggestions for future research

This paper presents EBA as an appropriate alternative to or complement with CBA for pro-ject evaluation in developing regions, particu-larly in the context of small-scale sustainable development projects that are components of en-vironmental protection programs.

Clearly there is much more work to be done in developing the EBA methodology. As hap-pened with CBA, standard methodologies, rules, and exceptions to rules will take time and expe-rience to develop. The calculations presented in the application of EBA to alternatives in Yu-cata´n agriculture are embryonic, and EBA needs to be practiced and honed to a much greater extent. This will only happen if the methodology is adopted by governments and NGOs.

A general way in which EBA can be extended and improved upon would be in the develop-ment of standardized methodologies to capture additional detail and richness in project evalua-tion. For example, in both the description and application above, ‘a job is a job’; no distinction is made between types of jobs, who has the jobs, at what times in the period of analysis the jobs are present, or whether certain jobs actually increase welfare rather than simply maintaining it at a constant level. In many cases, it might be useful to provide additional focus on impacts on women or other specific groups. In general, there are probably numerous methodological ex-tensions that could add significantly to the in-formation that EBA can provide.

A provocative area for future discussion and debate would be on the potential role of EBA in the political economy of project evaluation in developing regions. It would seem obvious that EBA has the potential to challenge vested inter-ests, both in the ‘development community’ and

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with respect to the economic interests in any region or project under evaluation. Different eval-uation results, such as are likely to be achieved with EBA in comparison to CBA, produce differ-ent winners and losers. Anecdotal evidence sug-gests that there is already a great need for EBA ‘in the field’ to counter CBA when projects or activities have considerable differences in their generation of employment or population support relative to their generation of net income. Such projects also often have considerable differences with regard to environmental protection, sustain-ability, and equity. NGOs or local communities can find themselves at political odds with busi-ness, government, and other interests who often wield CBA to argue for a particular policy option. EBA can provide a powerful, relatively simple form of argument for or rebuttal against projects whose advantages or disadvantages might be less apparent when examined using CBA. In a larger sense, CBA ‘speaks a different language’ than EBA and is intended to capture entirely different concepts and priorities; EBA can give voice and dimension to sustainability considerations that were heretofore mostly mute.

It is highly appropriate that, as sustainability becomes increasingly recognized as our foremost

economic concern, ‘development’ increasingly

meanssustainable development. However, the old

tools and approaches of project evaluation do not adequately capture or reflect this new emphasis in development, and new tools and approaches must be developed. The primary point of this paper is that, even without all methodological questions resolved, measuring employment or population support rather than or in addition to net income makes a great deal of sense, especially in the multiple contexts of sustainable development and environmental protection in developing regions.

Acknowledgements

Several anonymous referees provided very use-ful comments; remaining errors are my own. This research was funded in part by the MacArthur Foundation.

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Cattle ranching is one of the major competing agricultural land uses in Yucata´n Peninsula (Cua-nalo de la Cerda, 1995; Santos and Anderson, 1995). While most ranches in Yucata´n have some diversified production of agriculture, on average a Yucatecan ranch has only 4% of its land in forest. Cattle are raised on a mixture of native and non-native grasses along with cultivated canes and fodder from ramon trees (Brosimun alcas -turm). Supplementary fodder is purchased at times by most ranches, usually during extended drought years, although at the time of the study, Santos and Anderson (1995) found that 73% of the ranches in their sample had not purchased supplementary fodder in the previous 12 months. Some cattle are pastured on a single field continu-ously, but most are rotated. The majority (79%) of ranches burn their fields annually to discourage unwanted grass and bush species (Santos and Anderson, 1995), so rotation is to permit recovery of grasses, not full forests. There are several rea-sons why cattle ranching masks an appropriate choice of alternative to milpa in the application of EBA. First, cattle ranching is widely cited as being associated with large scale deforestation in

4.2. Employment-based analysis

While no specific project in Yucata´n has yet to use EBA ex ante, several researchers have gath-ered data that permit use of both EBA and CBA methodologies in the evaluation of two forms of milpa agriculture and cattle ranching.13

‘Population support’ externalities are probably a net positive through the maintenance of forested areas that are between field use and used for

13_{I am extremely grateful to Dr Heriberto Cuanalo de la}

Cerda of Centro de Investigaciones y de Estudios Avanzados (CINVESTAV), Merida, and Luis Araujo Andrade of the Facultad de Economı´a, Universidad Autonoma de Yucata´n (UADY), for graciously providing me with data from their studies.

14_{No rotation is required for home gardens and living}

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15_{The fundamental findings of EBA of cattle ranching}

presented below, however, do not differ greatly amongst all three stratum.

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to use labor more efficiently, which should further highlight distinctions between the results of EBA and CBA.

The large ranches in Santos and Anderson (1995) consist of an average of 545 ha. According to Cuanalo de la Cerda (1995), many of these large ranches are managed by overseers (encar-gados) for absentee landowners, so that there is probably a considerable amount of local and re-gional capital flight. The numbers in Santos and Anderson (1995) support this contention, as they find that the average large ranch maintains 0.5 non-salaried (family) workers. This labor is sup-plemented by an average of 2.6 fixed salary work-ers and 5.1 conditional workwork-ers. Ranch ownwork-ers support a total of 7 family members on average, while the figure of 6.73 obtained from Cuanalo de la Cerda (1996a) is used for salaried workers, and conditional workers, and conditional workers are assumed not to have families or obtain their primary support from off the ranch.

4.3. Benefit-cost analysis

Traditional milpa on a 20-year rotation is rarely, if ever, actually practiced, so that CBA is not available for that development option.17

Table 1

EBA and CBA for alternative agricultural activities, Yucata´na

EBA, people-years for CBA, 100 ha, 20 years benefit-cost

ratio

Traditional 641 –

milpa

1.54 1495.6

Improved milpa

Cattle ranching 109.6 2.12

a_{Sources, Araujo (1995), Cuanalo de la Cerda (1996a,b).}

17_{Cuanalo de la Cerda (1996a) reports a cost-benefit ratio}

of 0.64 for unimproved milpa using the 6 – 8 year rotations.

18_{Note that this is just for the corn-bean-squash field}

com-ponent of the ‘improved milpa’. Cuanalo de la Cerda (1996a) reports cost-benefit ratios greater than one for all other com-ponents (fruit and vegetable production, pig and chicken production, apiary) of the improved milpa system.

16_{If part-time workers are supporting full families with their}

labor on cattle ranches, the resulting figures are 10.89 people per 100 years, or 217 people-years per 100 ha.

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(and over small sample size), they are suitable for comparison.

4.4. Analysis of findings

The figures in Table 1 also demonstrate EBA’s usefulness in analyzing different overall economic activities (as opposed to specific projects). The analysis suggests that if Mexican

5. Conclusions and suggestions for future research This paper presents EBA as an appropriate alternative to or complement with CBA for pro-ject evaluation in developing regions, particu-larly in the context of small-scale sustainable development projects that are components of en-vironmental protection programs.

(5)

It is highly appropriate that, as sustainability becomes increasingly recognized as our foremost economic concern, ‘development’ increasingly meanssustainable development. However, the old tools and approaches of project evaluation do not adequately capture or reflect this new emphasis in development, and new tools and approaches must be developed. The primary point of this paper is that, even without all methodological questions resolved, measuring employment or population support rather than or in addition to net income makes a great deal of sense, especially in the multiple contexts of sustainable development and environmental protection in developing regions.