Research on World Agricultural Economy

Hidden Cost of Soil Erosion: From Biophysical Cost to Institutional Economics of Agribusiness

Suharno

Department of Agribusiness, IPB University, Dramaga Campus, Bogor 16880, Indonesia

Ratna Katarina

Theology Agricultural Development Institute, STT SAPPI, Cianjur 43282, Indonesia

Harianto

Department of Agribusiness, IPB University, Dramaga Campus, Bogor 16880, Indonesia

Nia Rosian

Department of Agribusiness, IPB University, Dramaga Campus, Bogor 16880, Indonesia

Yohanna Retnaning Widyastuti

Aquaculture Research Center of Indonesia Research and Innovation Agency (BRIN), Jalan Raya Jakarta ‑ Bogor KM

46, Cibinong 16911, Indonesia

DOI: https://doi.org/10.36956/rwae.v7i1.2583

Received: 8 August 2025 | Revised: 12 September 2025 | Accepted: 23 September 2025 | Published Online: 30 December 2025

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Abstract

Agribusiness in tropical highland environments faces two interconnected challenges: persistent soil erosion and the absence of robust institutional systems to address it. This research addresses both biophysical and agronomic concerns, as well as governance shortcomings, by estimating the hidden economic costs of potato cultivation in Pangalengan, West Java, and suggesting alternative institutional arrangements to counter erosion. Primary data were obtained through a randomized field survey of 184 potato farmers, representing approximately 15% of a sampling frame of 1204 farmers. Secondary sources, including climate and environmental data, were also incorporated. Soil nutrient losses were estimated using the SCUAF model, and these estimates were integrated with a production function analysis to quantify the economic losses attributable to erosion. In addition, an institutional arrangement framework was developed, drawing on established concepts from institutional economics. The results indicate that the hidden costs associated with potato farming surpass the actual costs, yet overall profitability remains positive. These findings suggest opportunities for policy interventions that could promote sustainable farming in erosion-prone uplands. By integrating SCUAF-based biophysical modelling with economic loss estimation within an institutional economics framework, this study connects environmental degradation, financial implications, and governance gaps. It provides a practical case for upland potato production in Pangalengan and offers both academic contributions and actionable insights for developing sustainable and economically viable agribusiness models in highland settings.

Keywords: Hidden Costs; Upland Agriculture; Institutional Economics; Potato Cultivation; SCUAF; Soil Erosion

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