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The Effects of Energy Prices on Groundwater Extraction in Agriculture in the High Plains Aquifer

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  • Pfeiffer, Lisa
  • Lin, Cynthia

Abstract

In this paper we examine the effects of energy prices on groundwater extraction using an econometric model of a farmer’s irrigation water pumping decision that accounts for both the intensive and extensive margins. Our results show that energy prices have an important effect on both the intensive and extensive margin. Increasing energy prices would affect crop selection decisions, crop acreage allocation decisions, and the demand for water by farmers. Our estimated total marginal effect, which sums the effects at the intensive and extensive margins, is that an increase in the natural gas futures contract price of 1 cent/1000 btu would decrease water extraction by an individual framer by 102.88 acre-feet per year, which is approximately 63% of the average amount pumped in a year by a farmer.

Suggested Citation

  • Pfeiffer, Lisa & Lin, Cynthia, 2013. "The Effects of Energy Prices on Groundwater Extraction in Agriculture in the High Plains Aquifer," 2014 Allied Social Sciences Association (ASSA) Annual Meeting, January 3-5, 2014, Philadelphia, PA 161890, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaeass:161890
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    File URL: http://ageconsearch.umn.edu/record/161890/files/Pfeiffer%20and%20Lin.pdf
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    References listed on IDEAS

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    1. Shenggen Fan & Ashok Gulati & Sukhadeo Thorat, 2008. "Investment, subsidies, and pro-poor growth in rural India," Agricultural Economics, International Association of Agricultural Economists, vol. 39(2), pages 163-170, September.
    2. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-959, July.
    3. S. Mahendra Dev, 2008. "India," Chapters,in: Handbook on the South Asian Economies, chapter 1 Edward Elgar Publishing.
    4. Pfeiffer, Lisa & Lin, C.-Y. Cynthia, 2012. "Groundwater pumping and spatial externalities in agriculture," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 16-30.
    5. Kumar, M. Dinesh, 2005. "Impact of electricity prices and volumetric water allocation on energy and groundwater demand management:: analysis from Western India," Energy Policy, Elsevier, vol. 33(1), pages 39-51, January.
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    Keywords

    Demand and Price Analysis; Resource /Energy Economics and Policy;

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