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Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information

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Author Info

  • Chokri Dridi

    (University of Illinois at Urbana-Champaign)

  • Madhu Khanna

    (University of Illinois at Urbana-Champaign)

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; farmers’ heterogeneity is defined by a mix of land quality and knowledge. 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.

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File URL: http://128.118.178.162/eps/othr/papers/0409/0409005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Others with number 0409005.

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Length: 35 pages
Date of creation: 11 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpot:0409005

Note: Type of Document - pdf; pages: 35. Forthcoming in: American Journal of Agricultural Economics
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Web page: http://128.118.178.162

Related research

Keywords: Asymmetric information; Irrigation technology; Technology adoption; Water trading.;

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References

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  1. 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.
  2. Livingston, Marie Leigh & DEC, 1993. "Designing water institutions : market failures and institutional response," Policy Research Working Paper Series 1227, The World Bank.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. Gresik, Thomas A., 1991. "Ex ante efficient, ex post individually rational trade," Journal of Economic Theory, Elsevier, vol. 53(1), pages 131-145, February.
  8. 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.
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Citations

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Cited by:
  1. Koundouri, Phoebe & Nauges, Céline & Tzouvelekas, Vangelis, 2009. "The Effect of Production Uncertainty and Information Dissemination of the Diffusion of Irrigation Technologies," TSE Working Papers 09-032, Toulouse School of Economics (TSE).
  2. 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.
  3. 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.
  4. 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.
  5. Sauer, Johannes & Zilberman, David, 2009. "Innovation Behaviour At Farm Level – Selection And Identification," 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland 51073, Agricultural Economics Society.
  6. 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).
  7. 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.

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