Water Markets and Third Party Effects
AbstractWe examine the potential effects of water trading on aggregate welfare and income distribution across the agricultural and service sector of a small rural economy. We show that per capita welfare (real income) of agents in the region increase with increased water trading. Not surprisingly, if enough agents leaves the region (income flight), nominal income can fall. If the share of household income spent on services is large (small) relative to the cost share of services in agricultural production, then the service price increases (decreases) with increased water trading. Typically when the service price falls (increases) farmers win (lose), service providers lose (win) and agricultural service providers almost always lose. Thus, a natural conflict emerges between farming and service sector stakeholders.
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Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25616.
Date of creation: 2006
Date of revision:
Resource /Energy Economics and Policy; Q25; Q28; R0;
Other versions of this item:
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
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- Marianne LEFEBVRE & Lata GANGADHARAN & Sophie THOYER, 2011. "Do Security-differentiated Water Rights Improve Efficiency?," Working Papers 11-14, LAMETA, Universtiy of Montpellier, revised Jun 2012.
- Jason Henderson & Maria Akers, 2008. "Can markets improve water allocation in rural America?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 97-117.
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