A Thirst for Efficiency: Finding the Relationship between Water Trading and Agricultural Water Use Efficiency in the Murray-Darling Basin
The Australian government has put forward many policies in the past three decades with the aim of increasing water market activity. Water trading is widely thought to transfer water to its highest productive use in order to extract the greatest benefit to society. This paper employs an empirical analysis of the agricultural water market in the Southern Murray-Darling Basin in order to determine whether trading has indeed induced agricultural water use efficiency. This thesis focuses on technical water use efficiency as it searches for evidence that water trade has induced innovation in minimizing water use at the farm level. This research is done on three different scales in order to test the relationship between water trade and the efficiency of its use in several situations. First a cross-sectional analysis of the Goulburn Murray Irrigation District shows an increasing trend in water use efficiency between 1998/99 and 2010/11, although only a weak relationship with trade is found. Second a panel-data regression is performed across the four Murray-Darling Basin states in order to estimate the relationship that both permanent and temporary trade has on water use efficiency. The results of the panel regression conclude that while a 1GL increase in permanent water entitlement trade has led to a 0.00089ML/Ha increase in water use efficiency over the past 15 years, there is no hard evidence that temporary trade has had the same effect. Finally a case study of the dairy industry in the Goulburn region models the incentives faced by farmers who can substitute between feed grain and water for pastured grass as production inputs. Given water and grain prices it is possible to illustrate the optimal decision making of farmers in 2007/08 to see the positive impact of water trading in promoting economic efficiency. This thesis makes an important empirical contribution to the current literature on water markets. The analysis done determines the relative success of permanent water entitlement trade in inducing innovation in water use; this innovation in water use increases technical water use efficiency.
|Date of creation:||Feb 2013|
|Date of revision:|
|Contact details of provider:|| Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200|
Phone: 0409 032 338
Web page: http://www.aares.info/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- D. Peterson & G. Dwyer & D. Appels & J. Fry, 2005.
"Modelling Water Trade in the Southern Murray-Darling Basin,"
- Peterson, Deborah C. & Dwyer, Gavan & Appels, David & Fry, Jane, 2004. "Modelling Water Trade in the Southern Murray-Darling Basin," Staff Working Papers 31925, Productivity Commission.
- Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988.
"Estimating Vector Autoregressions with Panel Data,"
Econometric Society, vol. 56(6), pages 1371-95, November.
- Tom Doan, . "RATS program to demonstrate IV estimation of VAR in panel data," Statistical Software Components RTZ00185, Boston College Department of Economics.
- Alan Randall, 1981. "Property Entitlements And Pricing Policies For A Maturing Water Economy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 25(3), pages 195-220, December.
- Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
- David Roodman, 2006.
"How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata,"
103, Center for Global Development.
- David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
- Hearne, Robert R. & Easter, K. William, 1997.
"The economic and financial gains from water markets in Chile,"
Agricultural Economics of Agricultural Economists,
International Association of Agricultural Economists, vol. 15(3), January.
- Hearne, Robert R. & William Easter, K., 1997. "The economic and financial gains from water markets in Chile," Agricultural Economics, Blackwell, vol. 15(3), pages 187-199, January.
- Bjornlund, Henning & McKay, Jennifer, 2002. "Aspects of water markets for developing countries: experiences from Australia, Chile, and the US," Environment and Development Economics, Cambridge University Press, vol. 7(04), pages 769-795, October.
- Pujol, Joan & Raggi, Meri & Viaggi, Davide, 2006.
"The potential impact of markets for irrigation water in Italy and Spain: a comparison of two study areas,"
Australian Journal of Agricultural and Resource Economics,
Australian Agricultural and Resource Economics Society, vol. 50(3), September.
- Joan Pujol & Meri Raggi & Davide Viaggi, 2006. "The potential impact of markets for irrigation water in Italy and Spain: a comparison of two study areas ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 361-380, 09.
When requesting a correction, please mention this item's handle: RePEc:ags:aare13:152156. 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)
If references are entirely missing, you can add them using this form.