This paper describes the use of input-output modeling in estimating the economic impacts of the conservation reserve program (CRP) in North Dakota, discusses challenges faced in conducting the analysis, and examines lessons learned from the study. The study had two major phases: (1) a statewide survey of CRP participants was conducted to determine selected characteristics of those individuals and their enrolled land that would be important for subsequent impact estimation and (2) a regional input-output model was used to estimate the indirect effects of the CRP program for each of the state's five pool groups. The results of this analysis indicated that the impacts of the Conservation Reserve Program on the North Dakota economy were relatively modest. Based on the 1.3 million acres removed from production through the fifth sign-up, total business activity was reduced by only 0.54 percent statewide and 0.91 percent for the most affected region. However, it should be noted that the impacts were not distributed uniformly among sectors or communities.Environmental Economics and Policy, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy,

Leistritz, F. Larry

English

Research Papers in Economics

1Paper presented at Symposium on “Challenges and Solutions in Using Input-Output
(I-O) Analysis for Conservation Programs and Projects,” AAEA 1998 Conference, Aug. 2-5,
Salt Lake City, Utah.
2Professor, Department of Agricultural Economics, North Dakota State University, Fargo. 
Using Input-Output (I-O) Analysis in Evaluating Conservation Programs
And Projects:  Lessons Learned from Evaluation of the Conservation
Reserve Program (CRP)
1
F. Larry Leistritz
2
The prospect of changes in land use, such as those associated with conservation programs
and projects, often leads to questions about the local and regional economic impacts likely to
result from these changes.   While alternative techniques for estimating the economic impacts of
projects and programs are available, input-output models are being used increasingly for these
types of evaluations (Leistritz).  This paper describes the use of input-output modeling in
estimating the economic impacts of the conservation reserve program (CRP) in North Dakota,
discusses challenges faced in conducting the analysis, and examines lessons learned from the
study.
CRP Study
The Conservation Reserve Program (CRP) was authorized by the 1985 Food Security Act
(Public Law 99-198).  Its major objective was to take highly erodible land out of agricultural
production, thereby reducing wind and water erosion, protecting long-term food-producing
capability, reducing sedimentation, improving water quality, creating wildlife habitat, curbing
excess crop production, and providing income support for farmers. Landowners wishing to
participate in CRP agreed to implement a conservation plan that provided for permanent
vegetative cover on the land for ten years.  In return, the federal government paid the landowner
an annual contract payment determined by a bidding process (Mortensen et al. 1990).
Participation in CRP was high in North Dakota.  Through the twelfth sign-up period
(1992), North Dakota ranked second among all states with 3.2 million acres, or 11 percent of the
state’s cropland, under CRP contracts (Osborn et al.).  Because of the high level of participation
in CRP, as well as previous experience with the “Soil Bank” program of the 1950s, policymakers
raised questions about the possible economic impacts of the CRP program.  Potential impacts that
were identified included those that could arise from (1) reductions in use of agricultural inputs
such as fuel, fertilizer, and chemicals; (2) reduction in use of farm labor and machinery; and (3)
long-term changes in land use if CRP land were not returned to crop production at the end of the
contract period.  The analysis reported here was undertaken to estimate the short-run economic
impacts of the CRP program in North Dakota (i.e., those arising from reductions in use of
agricultural inputs).2
Procedures
The study had two major phases.  First, a statewide survey of CRP participants was
conducted to determine selected characteristics of those individuals and their enrolled land that
would be important for subsequent impact estimation.  These characteristics included land
attributes (such as comparison of costs and returns and soil productivity to those of non-CRP land
in the area, comparison of CRP payments to local cash rents, cover option chosen, and cost of
cover establishment) and landowner characteristics (such as age, residency, level of farm income,
and use of CRP payments).  A questionnaire was mailed to nearly 3,000 randomly selected
landowners in North Dakota (approximately 40 percent of all participants through the fifth sign-
up) in March 1988.  Follow-up mailings resulted in 1,289 useable surveys for a response rate of
44 percent.  Response rates were quite similar for each of the state’s five pool groups (i.e.,
geographic groupings of counties based on similarity of soil and climatic conditions).
 Key survey results were tabulated, then a regional input-output model, previously
developed from primary data and consisting of 17 sectors, was used to estimate the indirect
effects of the CRP program for each of the state’s five pool groups.  (For a detailed description of
the model, see Coon et al.)  An important prerequisite to providing these indirect effects was
estimating the direct effects of program participation on farm expenditures and income.  Sectors
expected to experience direct effects were as follows:
1. The retail trade sector (fertilizer, fuel, oil, seed, chemicals, machinery, hardware);
2. The finance, insurance, and real estate sector (crop insurance, property insurance,
borrowed capital);
3. Business and personal services (machinery repairs, custom farm operations, legal
and accounting services); and 
4. The household sector (net income from farm operations, payments to hired labor,
CRP contract payments).
The procedures used to estimate these changes in expenditures are summarized in Figure 1. 
Three main sources of data were used to estimate expenditures changes: (1) county CRP survey
data (Mortensen et al. 1988), (2) North Dakota agricultural statistics, and (3) county data from
the state Agricultural Stabilization and Conservation Service (ASCS)(now Consolidated Farm
Service Agency).  Initially compiled on a county-by-county basis, the resulting estimates fall into
three main categories: (1) reduced input expenditures, (2) reduced federal commodity payments,
and (3) increased CRP contract payments and upkeep costs, all based on acres enrolled through
the fifth sign-up (1.3 million acres, statewide).  (For a more detailed discussion, see Mortensen et
al. 1989.)
After the change in business activity resulting from the CRP program had been estimated
for each sector, the resulting change in employment was estimated based on historic relationships
between employment and gross business volume in each sector.3
COUNTY CRP SURVEY DATA -1987
AVERAGE
ANNUAL
CRP
PAYMENT
ANNUAL
CRP
UPKEEP
COSTS
PROPORTION
OF CRP ACRES
IN VARIOUS
CROPS
AVERAGE
YIELD
REDUCTION
ON CRP LAND
ND AG STATISTIC -1987
COUNTY
CROP
YIELDS
COUNTY
CROP
ACRES
AVERAGE
ANNUAL
CROP
PRICES
ASCS -1987
COUNTY
CRP
ACRES
DEFICIENCY AND
DIVERSION PAYMENTS
FOR PROGRAM CROPS
REDUCED
CROP
YIELDS
CRP ACRES
OF VARIOUS
CROPS
MODIFIED EXTENSION CROP ENTERPRISE BUDGET
RRV
EAST CENTRAL
WEST CENTRAL
WEST
VARIOUS CROPS
ESTIMATED GAIN
IN CRP PAYMENTS
AND UPKEEP
EXPENDITURES
ESTIMATED REDUCED
INPUT EXPENDITURES
BY SECTOR
Figure 1. Procedure for estimating direct impacts of CRP.
RECOMBINE COUNTY
TOTALS
INTO POOL GROUPS
INPUT-
OUTPUT
MODEL
ESTIMATED
REDUCED
GOVERNMENT
PAMENTS
ECONOMIC IMPACT
BY POOL GROUP
(3)
(1)
(2)4
Results
CRP participants generally felt their CRP land was less productive than other land in the
area and that input costs were slightly higher (Table 1).  (Unless otherwise noted, the values
shown are the mean for all survey respondents.)  CRP contract payments were felt to be 6.7
percent higher, on average, than prevailing cash rental rates in the area.  The initial cost of
establishing CRP cover averaged $37.20 per acre with more than 42.4 percent of responses falling
between $30 and $40.  Annual maintenance costs averaged $6.92 per acre, while annual contract
payments averaged $36.98.  More than 60 percent of all contracts had annual payments of $30 to
$40.
The average age of CRP landowners was 57 years, and 90 percent lived in North Dakota
(Table 1).  About 73 percent of respondents had farmed either full- or part-time in 1987.  For the
farmers, the average gross farm income for 1987 was just over $94,000, or about 20 percent less
than that reported for that year by a statewide longitudinal farm panel (Leistritz et al.).  The
average net cash farm income of $16,259 was about 22 percent less than that for the farm panel. 
For 41 percent of these producers, their CRP income exceeded their net cash farm income, and
about 21 percent said that the program enabled them to continue farming.
The majority of survey participants (54.5%) intended to use their CRP payments for living
expenses.  Other uses of the CRP income were (1) paying CRP land debt (28%), (2) paying other
debt (24.5%), and (3) savings or investment (22%).  About 14 percent intended to use part or all
of their annual payments to retire in North Dakota, whereas only 3.5 percent planned to use their
payments to retire out of state.  Likewise, about 10 percent and 3.5 percent intended to use their
payments for leisure activities in-state and out-of-state, respectively.
Reduced direct expenditures caused by taking CRP land out of production totaled $55
million for the state with nearly 62 percent impacting the retail sector (Table 2).  Pool groups
two, four, and five had the highest net impact at about $12 million each.  The household sector
was positively affected in pool groups one, two, and three primarily because the CRP rental
payments exceeded the farm income and government program payments that were foregone.
The direct effects were applied to the input-output model to estimate the total impact of
the CRP program.  Table 3 summarizes baseline business activity (i.e., estimated gross business
volume or gross receipts of the respective sectors for the period 1980-87); the changes in business
activity associated with CRP-related reductions in expenditures; increases in household incomes;
and the net effect of the CRP program on business activity in each sector.  The $55 million in
direct effects resulting from the CRP result in about $141 million in reduced business activity for
the state--an overall multiplier of 2.56.  This total is spread among 13 sectors of the state’s
economy with the retail sector absorbing the greatest impact--about 40 percent of the state total.5
Table 1.  Selected Characteristics of CRP Land and Participants, North Dakota, 1988
Item Units Value
Yields--CRP land compared to
    land not in CRP Percent -9.5
Input costs--CRP land compared to
    land not in CRP Percent 0.5
CRP contract payment compared
    to cash rent Percent 6.7
Costs per acre to establish CRP cover Dollars 37.20
Costs per acre to maintain CRP cover Dollars 6.92
Annual CRP contract payment Dollars 36.98
Type of CRP cover:
    Grass and/or legumes Percent 91.0
    Trees (on part of area) Percent 9.0
Landowner age Years 57.2
Landowner residence:
    North Dakota Percent 90.0
    Bordering states Percent 4.2
    Elsewhere Percent 5.8
Landowner occupation:
    Farmer Percent 73.0
    Other Percent 27.0
Gross farm income, 1987 (farmers only)(ave.) Dollars 92,440
Net cash farm income, 1987 (farmers only)(ave.) Dollars 16,259
CRP payment as a percent of net farm income:
    Over 100 percent or net farm
     income was negative Percent 40.6
    50 to 100 percent Percent 13.2
    26 to 50 percent Percent 18.5
    0 to 25 percent Percent 27.8
Did the CRP program enable you to 
     continue farming?
Yes Percent 20.66
Table 2.  Acres Enrolled in CRP and the Associated Loss of Production Expenditures and Change
in Income, by CRP Pool Group, 1987 
Acres
Pool Through                 Reduced Expenditures                    Change in Income    
Group 5th Sign-up Retail FIRE* B&P Serv        Households
                       -----------------------Thousand Dollars-------------------------------
1 244,518 -4,940 -1,787 -1,619 10
2 381,409 -8,539 -3,074 -2,649 2,033
3 260,548 -6,563 -2,406 -1,961 755
4 240,997 -7,986 -2,541 -1,950 -92
5 174,975 -7,262 -2,112 -1,772 -1,448
State          1,302,048 -35,291 -11,919 -9,951 1,258
State Total Percentage
of Reduced Expenditures 61.7% 20.9% 17.4%
*Finance, Insurance, and Real Estate7
Table 3.  Average 1980-1987 Baseline Business Activity and Business Activity Associated with
Reduced Production Expenditures and Income Change Resulting from CRP Acres by Economic
Sector, North Dakota, 1987
Baseline               CRP Business Activity                    
Business  Production  Income  Net
 Sector Activity* Expenditures  Change Change
---------------------thousand dollars------------------------
Ag. livestock 1,406,058 -4,254 85 -4,169
Ag. crops 3,662,184 -1,709 33 -1,676
Nonmetal mining 49,420 -186 7 -179
Construction 730,076 -2,650 113 -2,537
Transportation 91,330 -627 12 -615
Comm. & pub utilities 659,314 -4,540 133 -4,407
Ag proc & misc mfg 2,143,329 -2,670 52 -2,618
Retail trade 5,321,801 -57,505 937 -56,568
FIRE 1,110,927 -16,731 211 -16,520
Bus & pers services 488,715 -12,056 76 -11,980
Prof & soc services 521,151 -2,442 124 -2,318
Households 7,955,811 -35,685 1,953 -33,732
Government 679,028 -3,437 136 -3,301
Coal mining 134,774 0 0 0
Thermal elec generation 225,900 0 0 0
Petroleum exp/extraction 883,623 0 0 0
Petroleum refining 120,864 0 0 0
Total 26,247,305 -144,492 3,872 -140,620
*Baseline business activity is based on the 1980-1987 average sales for final demand in terms of
1987 = base dollars.
Among the county groupings, pool group five had the largest absolute impact from the
CRP, reflecting the more intensive nature of agriculture in eastern North Dakota (Figure 2).  Pool
group four, on the other hand, had the greatest percentage impact.  In no case, however, did the
CRP impact exceed 1 percent of the area’s baseline business volume.  Employment effects of CRP
were distributed somewhat differently than effects on gross business volume; pool group two had
the largest total impact.  Although the total CRP-related potential employment reduction was
estimated to be only 2,416 jobs statewide, or about 0.77 percent of average annual employment in
1987, it should be noted that much of this employment loss may be concentrated in the state’s
most agriculturally dependent rural areas--areas already hard-hit by reductions in retail trade
volume and employment stemming from the depressed state of the agricultural economy.8
Pool 2
29.3%
$30.0
-0.68%
552
Pool 3
Pool 1
Pool 4
Pool 5
18.8%
$21.2
-0.33%
371
20.0%
$25.5
-0.52%
453
18.5%
$31.6
-0.91%
523
13.4%
$32.2
-0.39%
517
Key:     CRP acres as a percent of state total
 Total CRP impact in million dollars
 CRP impact as a percentage of the pool's baseline
 CRP-related employment change
Figure 2. Economic and employment impacts of CRP on various pool groups.9
   The results of this analysis indicated that the impacts of the Conservation Reserve
Program on the North Dakota economy were relatively modest.  Based on the 1.3 million acres
removed from production through the fifth sign-up, total business activity was reduced by only
0.54 percent statewide and 0.91 percent for the most affected region.  Assuming that the impacts
would be proportional on a per acre basis, the additional acreage enrolled through the twelfth
sign-up (3.2 million acres total) would result in a statewide impact of about 1.3 percent. 
However, it should be noted that the impacts were not distributed uniformly among sectors or
communities.  Rather, the retail sector accounted for more than 40 percent of the total impact of
the program, and within the retail sector, businesses that relied on farm supplies or machinery for
much of their volume were affected much more than others.  Similarly, because CRP enrollment
varied substantially among counties, those with higher percentages of their land enrolled
obviously experienced greater impacts.
In addition to the negative effects resulting from initial reductions in agricultural activities,
the program has a number of positive aspects.  One very noticeable benefit of CRP in the
Northern Great Plains region has been enhanced wildlife habitat, which has contributed to
substantial increases in upland game bird and waterfowl populations (see, for example, Grand
Forks Herald).  Increased wildlife populations have in turn led to increases in hunting by both
resident and nonresident sportsmen, which results in substantial recreation-related expenditures in
rural areas (Lewis et al.).  Another positive aspect of the program has been its contribution to
income stability for the participating landowners.  During a period when the region’s farmers and
landowners experienced adverse weather and market conditions, CRP income had a cushioning
effect for both landowners’ income and for the economic base of the region’s rural communities.
Lessons Learned
In retrospect, the CRP study appears to have served its purpose in informing the region’s
decision makers regarding the short run economic implications of the program.  While the initial
effects of reduced agricultural production activities were negative, the analysis revealed that these
effects were relatively modest.  In particular, the extent to which CRP payments were being
received by out-of-state landowners was found to be substantially less than had been commonly
believed.  At the same time, the study demonstrated the program’s role in providing income
stability for program participants, and thus indirectly enhancing the economic stability of rural
communities.
While an input-output model was the analytical core of the study, much of the overall
effort was directed toward defining the direct effects of the program.  The survey of participants
represented the majority of the total project cost, and the survey results provided insights that
would otherwise have been unavailable.  This experience would support the more general
observation that analysts should allocate adequate resources to determining the direct effects of
the project or program being evaluated.  
In conclusion, input-output models are a valuable tool for estimating the economic
impacts of conservation programs and projects.  When used appropriately in conjunction with
other social science research tools and techniques, I-O models can make a useful contribution to
policy makers’ understanding of program implications.10
References 
Coon, R. C., F. L. Leistritz, T. A. Hertsgaard, and A. G. Leholm.  The North Dakota Input-
Output Model: A Tool for Analyzing Economic Linkages. Fargo: North Dakota
Agricultural Experiment Station, 1985.
Grand Forks Herald. “Biologist cites weather, CRP as key to pheasants.” Grand Forks, ND:
Grand Forks Herald, April 26, 1998.  
Leistritz, F. L. “Economic and Fiscal Impact Assessment.” Environmental Methods Review:
Retooling Impact Assessment for the New Century. A. Porter and J. Fittipaldi, eds., pp.
219-227. Fargo, ND: International Association for Impact Assessment and Army
Environmental Policy Institute, 1998.
Leistritz, F. L., B. L. Ekstrom, J. Wanzek, and T. L. Mortensen. Outlook of North Dakota Farm
Households: Results of the 1988 Longitudinal Farm Survey. Fargo: North Dakota
Agricultural Experiment Station, 1989.
Lewis, T. D., J. A. Leitch, and A. J. Meyer. Characteristics, Expenditures, and Economic Impact
of Resident and Nonresident Hunters and Anglers in North Dakota, 1996-97 Season and
Trends. Fargo: North Dakota Agricultural Experiment Station, 1998. 
  Mortensen, T. L., F. L. Leistritz, J. A. Leitch, R. C. Coon. and B. L. Ekstrom. “Socioeconomic
Impact of the Conservation Reserve Program in North Dakota.”  Society and Natural
Resources 3 (1990): 53-61.
  Mortensen, T. L., F. L. Leistritz, J. A. Leitch, R. C. Coon. and B. L. Ekstrom. “Landowner
Characteristics and the Economic Impact of the Conservation Reserve Program in North
Dakota.” Journal of Soil and Water Conservation 44 (1989): 494-497.
  Mortensen, T. L., F. L. Leistritz, J. A. Leitch,  and B. L. Ekstrom. A Baseline Analysis of
Participants in the Conservation Reserve Program in North Dakota. Fargo: North
Dakota Agricultural Experiment Station, 1988. 
 
Osborn, C. T., F. Llacuna, and M. Linsenbigler. The Conservation Reserve Program: Enrollment
Statistics for Signup Periods 1-12 and Fiscal years 1986-93. Washington, DC: USDA,
Economic Research Service.

A Baseline Analysis of Participants in the Conservation Reserve Program in North Dakota. Fargo: North Dakota Agricultural Experiment Station,

Biologist cites weather, CRP as key to pheasants.” Grand Forks, ND: Grand Forks Herald,

ND: International Association for Impact Assessment and Army Environmental Policy Institute,

Outlook of North Dakota Farm Households: Results of the 1988 Longitudinal Farm Survey. Fargo: North Dakota Agricultural Experiment Station,

Season and Trends. Fargo: North Dakota Agricultural Experiment Station,

The Conservation Reserve Program: Enrollment Statistics for Signup Periods 1-12 and Fiscal years 1986-93.

The North Dakota InputOutput Model: A Tool for Analyzing Economic Linkages. Fargo: North Dakota Agricultural Experiment Station,

USING INPUT-OUTPUT (I-O) ANALYSIS IN EVALUATING CONSERVATION PROGRAMS AND PROJECTS: LESSONS LEARNED FROM EVALUATION OF THE CONSERVATION RESERVE PROGRAM (CRP)

USING INPUT-OUTPUT (I-O) ANALYSIS IN EVALUATING CONSERVATION PROGRAMS AND PROJECTS: LESSONS LEARNED FROM EVALUATION OF THE CONSERVATION RESERVE PROGRAM (CRP)

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