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Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information

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  • Chokri Dridi
  • Madhu Khanna

Abstract

We develop a water allocation and irrigation technology adoption model under the prior appropriation doctrine with asymmetric information among heterogeneous farmers and between farmers and water authorities. We find that adverse selection reduces the adoption of modern irrigation technology. We also show that even with asymmetric information, incentives for water trade exist and lead to additional technology adoption with gains to all parties. This suggests that under asymmetric information, a thin secondary market improves the allocation of water resources and induces additional adoption of modern irrigation technologies. Copyright 2005, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2005.00722.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 87 (2005)
Issue (Month): 2 ()
Pages: 289-301

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Handle: RePEc:oup:ajagec:v:87:y:2005:i:2:p:289-301

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References

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  1. Janis M. Carey & David Zilberman, 2002. "A Model of Investment under Uncertainty: Modern Irrigation Technology and Emerging Markets in Water," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 171-183.
  2. Livingston, Marie Leigh & DEC, 1993. "Designing water institutions : market failures and institutional response," Policy Research Working Paper Series 1227, The World Bank.
  3. R. Maria Saleth & John B. Braden & J. Wayland Eheart, 1991. "Bargaining Rules for a Thin Spot Water Market," Land Economics, University of Wisconsin Press, vol. 67(3), pages 326-339.
  4. Dinar, Ariel & Letey, J., 1991. "Agricultural water marketing, allocative efficiency, and drainage reduction," Journal of Environmental Economics and Management, Elsevier, vol. 20(3), pages 210-223, May.
  5. Gresik, Thomas A., 1991. "Ex ante efficient, ex post individually rational trade," Journal of Economic Theory, Elsevier, vol. 53(1), pages 131-145, February.
  6. Khanna, Madhu & Isik, Murat & Zilberman, David, 2002. "Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality," Agricultural Economics, Blackwell, vol. 27(2), pages 157-174, August.
  7. Burness, H Stuart & Quirk, James P, 1980. "Water Law, Water Transfers, and Economic Efficiency: The Colorado River," Journal of Law and Economics, University of Chicago Press, vol. 23(1), pages 111-34, April.
  8. David Zilberman & Neal Macdougall & Farhed Shah, 1994. "Changes In Water Allocation Mechanisms For California Agriculture," Contemporary Economic Policy, Western Economic Association International, vol. 12(1), pages 122-133, 01.
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Cited by:
  1. Viaggi, D. & Raggi, M. & Bartolini, F. & Gallerani, V., 2010. "Designing contracts for irrigation water under asymmetric information: Are simple pricing mechanisms enough?," Agricultural Water Management, Elsevier, vol. 97(9), pages 1326-1332, September.
  2. Sauer, Johannes & Zilberman, David, 2009. "Innovation behaviour at farm level: Selection and identification," 49th Annual Conference, Kiel, Germany, September 30-October 2, 2009 53276, German Association of Agricultural Economists (GEWISOLA).
  3. Phoebe Koundouri & Celine Nauges & Vangelis TZOUVELEKAS, . "The Effect Of Production Uncertainty And Information Dissemination On The Diffusion Of Irrigation Technologies," DEOS Working Papers 1009, Athens University of Economics and Business.
  4. Margarita Genius & Phoebe Koundouri & Celine Nauges & Vangelis Tzouvelekas, . "Information Transmission in Irrigation Technology Adoption and Diffusion: Social Learning, Extension Services, and Spatial Effects," DEOS Working Papers 1329, Athens University of Economics and Business.
  5. Margarita Genius & Phoebe Koundouri & Celine Nauges & Vangelis TZOUVELEKAS, . "Information Spillovers in Irrigation Technology Diffusion: Social Learning, Extension Visits and Spatial Effects," DEOS Working Papers 1319, Athens University of Economics and Business.
  6. Veettil, Prakashan Chellattan & Speelman, Stijn & Frija, Aymen & Buysse, Jeroen & van Huylenbroeck, Guido, 2011. "Complementarity between water pricing, water rights and local water governance: A Bayesian analysis of choice behaviour of farmers in the Krishna river basin, India," Ecological Economics, Elsevier, vol. 70(10), pages 1756-1766, August.
  7. Dridi, Chokri & Khanna, Madhu, 2005. "Political Economy and Irrigation Technology Adoption Implications of Water Pricing under Asymmetric Information," 2005 Annual meeting, July 24-27, Providence, RI 19348, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Sauer, Johannes & Zilberman, David D., 2009. "Innovation behaviour at micro level - selection and identification," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6t49r0fh, Department of Agricultural & Resource Economics, UC Berkeley.

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