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Investment in Water Saving Technology on Horticultural Farms

  • Mallawaarachchi, Thilak
  • Hall, Nigel H.
  • Phillips, Brian

A long run programming model for analysing investment behaviour on perennial crop farms is formulated and applied to citrus and wine grape producing farms in the Murumbidgee Irrigation Area. Prices and technological parameters are defined exogenously, while the optimal replanting pattern of the crops and the optimal mix of irrigation techniques are determined endogenously. The model is used to examine likely investment in water saving irrigation technology at different crop prices and input costs. The results indicate that such investment is a profitable option at current water charges, particularly for those farmers with access to off-farm employment However, the adoption decision will be highly sensitive to potential cost savings. Water-saving technology could become more attractive under higher water charges, but only if the preferred option of farm expansion were not available. The modelling framework, which allows for control over many factors influencing perennial crop investment decisions' has applications in the analysis of the long term consequences of many policy options affecting farm yields or prices.

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Article provided by Australian Agricultural and Resource Economics Society in its journal Review of Marketing and Agricultural Economics.

Volume (Year): 60 (1992)
Issue (Month): 02 (August)

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Handle: RePEc:ags:remaae:7421
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  1. Stoneman, Paul L & David, Paul A, 1986. "Adoption Subsidies vs Information Provision as Instruments of Technology Policy," Economic Journal, Royal Economic Society, vol. 96(380a), pages 142-50, Supplemen.
  2. Rae, Allan N., 1970. "Capital Budgeting, Intertemporal Programming Models, With Particular Reference To Agriculture," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 14(01), June.
  3. J. M. Vandeputte & C. B. Baker, 1970. "Specifying the Allocation of Income among Taxes, Consumption, and Savings in Linear Programming Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 52(4), pages 521-527.
  4. Freebairn, J W, 1977. "Inflation and Stability of the Household Consumption-Savings Function," The Economic Record, The Economic Society of Australia, vol. 53(142&143), pages 198-218, June-Sept.
  5. Alaouze, Chris M. & Fitzpatrick, Campbell R., 1989. "A Mixed Integer Linear Programming Evaluation Of Salinity And Waterlogging Control Options In The Murray-Darling Basin Of Australia," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 33(03), December.
  6. H. W. Arndt & Burgess Cameron, 1957. "An Australian Consumption Function," The Economic Record, The Economic Society of Australia, vol. 33(64), pages 108-115, 04.
  7. Marc Nerlove, 1979. "The Dynamics of Supply: Retrospect and Prospect," Discussion Papers 394, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Steigum, Erling, Jr, 1983. "A Financial Theory of Investment Behavior," Econometrica, Econometric Society, vol. 51(3), pages 637-45, May.
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