The paper considers the effect of changes in the distribution of water price on the incentives to adopt water-conserving irrigation technologies. A two-stage decision model is developed wherein agents make long-term decisions about irrigation technology investments and decide production levels based on short-term realizations of water price. Comparative statics results show that the impact of changes in the distribution of water price hinge on the responsiveness of cultivated acreage to fluctuations in the price of water. The model is tested using data on irrigation technology investment from California's San Joaquin Valley. Econometric results strongly support the conceptual model, and show that changes in the distribution of water price have systematically different impacts on permanent and annual crops.
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2000 Annual meeting, July 30-August 2, Tampa, FL with number
21730.
Length: Date of creation: 2000 Date of revision: Handle: RePEc:ags:aaea00:21730
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