IDEAS home Printed from
   My bibliography  Save this paper

Estimating Production Inefficiency of Alternative Cost-Sharing Arrangements: A Case Study in Groundwater Pumping Decisions


  • Sun, Shanxia
  • Sesmero, Juan
  • Schoengold, Karina


In Mexico, farmers only pay the cost of electricity used to pump groundwater from wells for groundwater consumption and also receive electricity subsidy from government. It causes the fact that farmers consume groundwater under the situation that private marginal cost is lower than social marginal cost. Furthermore, in Mexico, different wells function under different institutional arrangements. Some wells are privately owned while others are shared by multiple farmers. In some shared wells, farmers pay for their own electricity consumption but in other shared wells farmers distribute total electricity cost based on a pre-specified rule. Both the jointly ownership and pre-specified payment rule may cause further distortion of groundwater pumping cost. By estimating the frontier demand function and technical efficiency of groundwater, we calculate the own-price elasticity of groundwater and test the effect of joint ownership and pre-specified electricity payment rule on the groundwater use efficiency. It is found that the groundwater has a negative and large (-0.5) own-price elasticity and that the number of farmers owning one well and the pre-specified payment rules do not affect the efficiency level significantly. The elimination of electricity subsidy may be the most effective policy to alleviate groundwater depletion in Mexico.

Suggested Citation

  • Sun, Shanxia & Sesmero, Juan & Schoengold, Karina, 2013. "Estimating Production Inefficiency of Alternative Cost-Sharing Arrangements: A Case Study in Groundwater Pumping Decisions," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150285, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea13:150285

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Environmental Economics and Policy; Resource /Energy Economics and Policy;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea13:150285. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.