Farmer Behavior Under Groundwater Management Scenarios: Implications for Groundwater Conservation in the Mississippi Alluvial Plain

Concern about sustained availability of fresh groundwater for agricultural use in the Mississippi Alluvial Plain (MAP) mounts as groundwater levels decline. We evaluate the elasticities of demand for groundwater and other agricultural inputs, as well as the overall and output-specific economies of scale for four major irrigated commodities (rice, corn, soybeans, and cotton) in the MAP region. Additionally, we investigate the impacts of two groundwater management policy scenarios, including increasing pumping cost and groundwater use restrictions, on irrigation behavior. The results show price elasticity of demand for groundwater to be −0.13, indicating that it is inelastic, and an increased cost of pumping will not significantly decrease the relative demand for groundwater in the region. Even with policy scenarios that either increase the costs of pumping significantly or restrict groundwater use in the region, groundwater demand still appears to be inelastic. We also document significant overall economies of scale in the region. Our findings have implications for potential policy options aimed at reducing groundwater use. Efficient management practices are important to increase aquifer recharge, and considering human behavior via economic analysis will improve projections of groundwater availability in the MAP region.