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Exit Timing Decisions under Land Speculation and Resource Scarcity in Agriculture

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Author Info
Ranjan, Ram
Tapsuwan, Sorada
Abstract

This paper explores the concept of agricultural resilience in the context of climate change related water scarcity. Specifically, the impact of water scarcity on agricultural production is analyzed to derive the timing of exit decisions for farmers faced with the prospect of declining profitability in agriculture but increasing benefits from land rezoning in future. The prospects of land rezoning are modeled as a poison process which may or may not be influenced by farmer’s water abstraction decisions. Selling out of agriculture before land rezoning has an impatience cost as the farmer does not gain the maximum speculative rewards. The analysis highlights the role of such speculative rewards in making farmers resilient to declining profitability in agriculture and also identifies the circumstances under which the water prices may be an ineffective policy tool for allocating water. An empirical application is performed using the above model for the case of a drought prone region in Western Australia.

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Publisher Info
Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 5998.

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Date of creation: 2008
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Handle: RePEc:ags:aaea08:5998

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Related research
Keywords: agricultural resilience; exit timing; water scarcity; climate change; Environmental Economics and Policy; Farm Management; Land Economics/Use; Resource /Energy Economics and Policy;

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  1. Raup, Philip M., 1975. "Urban Threats To Rural Lands: Background And Beginnings," Staff Papers 13606, University of Minnesota, Department of Applied Economics. [Downloadable!]
  2. Ky–sti Pietola & Minna V”re & Alfons Oude Lansink, 2003. "Timing and type of exit from farming: farmers' early retirement programmes in Finland," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 30(1), pages 99-116, March.
  3. Lockeretz, William & Freedgood, Julia & Coon, Katherine, 1987. "Farmers' views of the prospects for agriculture in a metropolitan area," Agricultural Systems, Elsevier, vol. 23(1), pages 43-61. [Downloadable!] (restricted)
  4. Clarke, Harry R. & Reed, William J., 1994. "Consumption/pollution tradeoffs in an environment vulnerable to pollution-related catastrophic collapse," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 991-1010, September. [Downloadable!] (restricted)
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This page was last updated on 2009-12-26.

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