IDEAS home Printed from https://ideas.repec.org/a/eee/agiwat/v108y2012icp73-82.html
   My bibliography  Save this article

Predicting farmer responses to water pricing, rationing and subsidies assuming profit maximizing investment in irrigation technology

Author

Listed:
  • Medellín-Azuara, J.
  • Howitt, R.E.
  • Harou, J.J.

Abstract

Recent research suggests that regional hydrologic and economic implications should be considered before adopting policies encouraging efficient irrigation technology. Investigating regional effects of irrigation efficiency investments relies on predicting how farmers will adopt irrigation technology and practices in response to different water management policies. Under water rationing, price changes, subsidies and other policies, farmers will typically trade-off water use with irrigation efficiency investment in order to maximize profits. We employ a self-calibrating profit maximizing model of agricultural production based on the existing California Statewide Agricultural Production Model (SWAP). The model embeds irrigation efficiency vs. capital investment trade-offs for different crops to predict production, water use, irrigation investments, yields and water productivity under different water management policies. Calibration to observed cultivated areas and water application for different crops is performed using the positive mathematical programming (PMP) method. The trade-off between irrigation efficiency and capital investment is modeled as a nested constant elasticity of substitution constraint that allows substitution between irrigation investment and total applied water. The model is applied to the Tulare Basin in California's southern Central Valley. Policy simulations include an increase in water price, water rationing, and rationing and irrigation efficiency subsidies. Our results show subsidizing efficient irrigation technology may have a little effect on total land and water use and so may not promote water conservation without other incentives or regulations. Of the three policies simulated, a water price increase of 20% is found to be the most conducive to gains in agricultural water productivity (43% gain).

Suggested Citation

  • Medellín-Azuara, J. & Howitt, R.E. & Harou, J.J., 2012. "Predicting farmer responses to water pricing, rationing and subsidies assuming profit maximizing investment in irrigation technology," Agricultural Water Management, Elsevier, vol. 108(C), pages 73-82.
    • Handle: RePEc:eee:agiwat:v:108:y:2012:i:c:p:73-82
    DOI: 10.1016/j.agwat.2011.12.017
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378377411003416
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.agwat.2011.12.017?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ariel Dinar & Mark Campbell & David Zilberman, 1992. "Adoption of improved irrigation and drainage reduction technologies under limiting environmental conditions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(4), pages 373-398, July.
    2. Molden, David & Oweis, Theib & Steduto, Pasquale & Bindraban, Prem & Hanjra, Munir A. & Kijne, Jacob, 2010. "Improving agricultural water productivity: Between optimism and caution," Agricultural Water Management, Elsevier, vol. 97(4), pages 528-535, April.
    3. Howitt, Richard E., 2005. "PMP Based Production Models-Development and Integration," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24484, European Association of Agricultural Economists.
    4. Richard E. Howitt, 1995. "Positive Mathematical Programming," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(2), pages 329-342.
    5. Sunding, David & Zilberman, David, 2001. "The agricultural innovation process: Research and technology adoption in a changing agricultural sector," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 4, pages 207-261, Elsevier.
    6. Bruno Henry Frahan & Jeroen Buysse & Philippe Polomé & Bruno Fernagut & Olivier Harmignie & Ludwig Lauwers & Guido Huylenbroeck & Jef Meensel, 2007. "Positive Mathematical Programming for Agricultural and Environmental Policy Analysis: Review and Practice," International Series in Operations Research & Management Science, in: Andres Weintraub & Carlos Romero & Trond Bjørndal & Rafael Epstein & Jaime Miranda (ed.), Handbook Of Operations Research In Natural Resources, chapter 0, pages 129-154, Springer.
    7. Phoebe Koundouri & Céline Nauges & Vangelis Tzouvelekas, 2006. "Technology Adoption under Production Uncertainty: Theory and Application to Irrigation Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 657-670.
    8. Perry, Chris & Steduto, Pasquale & Allen, Richard. G. & Burt, Charles M., 2009. "Increasing productivity in irrigated agriculture: Agronomic constraints and hydrological realities," Agricultural Water Management, Elsevier, vol. 96(11), pages 1517-1524, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cao, Zhaodan & Zhu, Tingju & Cai, Ximing, 2023. "Hydro-agro-economic optimization for irrigated farming in an arid region: The Hetao Irrigation District, Inner Mongolia," Agricultural Water Management, Elsevier, vol. 277(C).
    2. Sapino, Francesco & Pérez-Blanco, C. Dionisio & Gutiérrez-Martín, Carlos & García-Prats, Alberto & Pulido-Velazquez, Manuel, 2022. "Influence of crop-water production functions on the expected performance of water pricing policies in irrigated agriculture," Agricultural Water Management, Elsevier, vol. 259(C).
    3. à lvarez-Albelo, Carmen D. & Hernández-Martín, Raúl & Padrón-Fumero, Noemi, 2020. "The effects on tourism of airfare subsidies for residents: The key role of packaging strategies," Journal of Air Transport Management, Elsevier, vol. 84(C).
    4. Zamani, Omid & Grundmann, Philipp & Libra, Judy A. & Nikouei, Alireza, 2019. "Limiting and timing water supply for agricultural production – The case of the Zayandeh-Rud River Basin, Iran," Agricultural Water Management, Elsevier, vol. 222(C), pages 322-335.
    5. Pierre-Alain Jayet & Delphine Barberis & Pierre Humblot & Anna Lungarska, 2018. "Spatializing the results of a bioeconomic model on water demand for irrigation needs [Spatialisation de la demande en eau d’irrigation estimée par un modèle bioéconomique]," Post-Print hal-02617894, HAL.
    6. Lan Mu & Chunxia Luo & Zongjia Tan & Binglin Zhang & Xiaojuan Qu, 2023. "Assessing the Impact of Different Agricultural Irrigation Charging Methods on Sustainable Agricultural Production," Sustainability, MDPI, vol. 15(18), pages 1-19, September.
    7. Jin Kathrine Fosli & A. Amarender Reddy & Radhika Rani, 2021. "The Policy of Free Electricity to Agriculture Sector: Implications and Perspectives of the Stakeholders in India," Journal of Development Policy and Practice, , vol. 6(2), pages 252-269, July.
    8. Linjing Ren & Xiaojun Yang, 2023. "Adoption and shift of water-saving strategies to policy shock: based on social-ecological system analysis," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(10), pages 4015-4037, August.
    9. Humblot, Pierre & Jayet, Pierre-Alain & Petsakos, Athanasios, 2017. "Farm-level bio-economic modeling of water and nitrogen use: Calibrating yield response functions with limited data," Agricultural Systems, Elsevier, vol. 151(C), pages 47-60.
    10. D. M. Lambert & C. N. Boyer & L. He, 2016. "Spatial-temporal heteroskedastic robust covariance estimation for Markov transition probabilities: an application examining land use change," Letters in Spatial and Resource Sciences, Springer, vol. 9(3), pages 353-362, October.
    11. Yaltaghian Khiabani, M. & Hashamy Shahadany, S.M. & Maestre, J.M. & Stepanian, R. & Mallakpour, I., 2020. "Potential assessment of non-automatic and automatic modernization alternatives for the improvement of water distribution supplied by surface-water resources: A case study in Iran," Agricultural Water Management, Elsevier, vol. 230(C).
    12. Adam Loch & David Adamson, 2015. "Drought and the rebound effect: a Murray–Darling Basin example," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 79(3), pages 1429-1449, December.
    13. Javier Martínez-Dalmau & Carlos Gutiérrez-Martín & Alfonso Expósito & Julio Berbel, 2023. "Analysis of Water Pricing Policy Effects in a Mediterranean Basin Through a Hydroeconomic Model," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(4), pages 1599-1618, March.
    14. M. E. Qureshi & M. D. Ahmad & S. M. Whitten & A. Reeson & M. Kirby, 2018. "Impact of Climate Variability Including Drought on the Residual Value of Irrigation Water Across the Murray–Darling Basin, Australia," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-25, January.
    15. Najafi Alamdarlo, Hamed & Pourmozafar, Hosein & Vakilpoor, Mohamad Hasan, 2019. "Improving demand technology and internalizing external effects in groundwater market framework, case study: Qazvin plain in Iran," Agricultural Water Management, Elsevier, vol. 213(C), pages 164-173.
    16. Gohar, Abdelaziz A. & Cashman, Adrian, 2016. "A methodology to assess the impact of climate variability and change on water resources, food security and economic welfare," Agricultural Systems, Elsevier, vol. 147(C), pages 51-64.
    17. Bozorg-Haddad, Omid & Malmir, Marzieh & Mohammad-Azari, Sahar & Loáiciga, Hugo A., 2016. "Estimation of farmers’ willingness to pay for water in the agricultural sector," Agricultural Water Management, Elsevier, vol. 177(C), pages 284-290.
    18. He-Lambert, Lixia & English, Burton C. & Lambert, Dayton M. & Clark, Christopher D. & Papanicolaou, Thanos, 2016. "Using Hydro-Economic Modeling to Analyze the Allocation of Agricultural Water in the Southeastern U.S," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235675, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xie, Yang & Zilberman, David, 2014. "The Economics of Water Project Capacities and Conservation Technologies," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169820, Agricultural and Applied Economics Association.
    2. Xie, Yang & Zilberman, David, 2015. "Water Storage Capacities versus Water Use Efficiency: Substitutes or Complements?," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205439, Agricultural and Applied Economics Association.
    3. He, Lixia & Horbulyk, Theodore M. & Ali, Md. Kamar & Le Roy, Danny G. & Klein, K.K., 2012. "Proportional water sharing vs. seniority-based allocation in the Bow River basin of Southern Alberta," Agricultural Water Management, Elsevier, vol. 104(C), pages 21-31.
    4. Cao, Zhaodan & Zhu, Tingju & Cai, Ximing, 2023. "Hydro-agro-economic optimization for irrigated farming in an arid region: The Hetao Irrigation District, Inner Mongolia," Agricultural Water Management, Elsevier, vol. 277(C).
    5. Sauer, Johannes & Zilberman, David, 2009. "Innovation Behaviour At Farm Level – Selection And Identification," 83rd Annual Conference, March 30 - April 1, 2009, Dublin, Ireland 51073, Agricultural Economics Society.
    6. Kooten, G. Cornelis van, 2013. "Modeling Forest Trade in Logs and Lumber: Qualitative and Quantitative Analysis," Working Papers 149182, University of Victoria, Resource Economics and Policy.
    7. Phogat, V. & Skewes, M.A. & McCarthy, M.G. & Cox, J.W. & Šimůnek, J. & Petrie, P.R., 2017. "Evaluation of crop coefficients, water productivity, and water balance components for wine grapes irrigated at different deficit levels by a sub-surface drip," Agricultural Water Management, Elsevier, vol. 180(PA), pages 22-34.
    8. CARPENTIER, Alain & GOHIN, Alexandre & SCKOKAI, Paolo & THOMAS, Alban, 2015. "Economic modelling of agricultural production: past advances and new challenges," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 96(1), March.
    9. Caroline Roussy & Aude Ridier & Karim Chaïb, 2014. "Adoption d’innovations par les agriculteurs : rôle des perceptions et des préférences," Post-Print hal-01123427, HAL.
    10. Gómez-Limón, José A. & Gutiérrez-Martín, Carlos & Riesgo, Laura, 2016. "Modeling at farm level: Positive Multi-Attribute Utility Programming," Omega, Elsevier, vol. 65(C), pages 17-27.
    11. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    12. Patrick Withey & G. Cornelis van Kooten, 2011. "The Effect of Climate Change on Land Use and Wetlands Conservation in Western Canada: An Application of Positive Mathematical Programming," Working Papers 2011-04, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    13. Ghahroodi, E. Mokari & Noory, H. & Liaghat, A.M., 2015. "Performance evaluation study and hydrologic and productive analysis of irrigation systems at the Qazvin irrigation network (Iran)," Agricultural Water Management, Elsevier, vol. 148(C), pages 189-195.
    14. Djiby Racine Thiam & Ariel Dinar & Hebert Ntuli, 2021. "Promotion of residential water conservation measures in South Africa: the role of water-saving equipment," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(1), pages 173-210, January.
    15. Jackson, Tamara M. & Khan, Shahbaz & Hafeez, Mohsin, 2010. "A comparative analysis of water application and energy consumption at the irrigated field level," Agricultural Water Management, Elsevier, vol. 97(10), pages 1477-1485, October.
    16. Margarita Genius & Phoebe Koundouri & Celine Nauges & Vangelis TZOUVELEKAS, 2013. "Information Spillovers in Irrigation Technology Diffusion: Social Learning, Extension Visits and Spatial Effects," DEOS Working Papers 1319, Athens University of Economics and Business.
    17. Koundouri, Phoebe & Nauges, Céline & Tzouvelekas, Vangelis, 2009. "The Effect of Production Uncertainty and Information Dissemination of the Diffusion of Irrigation Technologies," TSE Working Papers 09-032, Toulouse School of Economics (TSE).
    18. Taylor, Rebecca & Zilberman, David, 2015. "The Diffusion of Process Innovation: The Case of Drip Irrigation in California," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205320, Agricultural and Applied Economics Association.
    19. Lankford, Bruce, 2012. "Fictions, fractions, factorials and fractures; on the framing of irrigation efficiency," Agricultural Water Management, Elsevier, vol. 108(C), pages 27-38.
    20. Raju Ghimire & Wen-Chi Huang, 2015. "Household wealth and adoption of improved maize varieties in Nepal: a double-hurdle approach," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 7(6), pages 1321-1335, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:agiwat:v:108:y:2012:i:c:p:73-82. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/agwat .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.