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Water Rights for Variable Supplies

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  • Freebairn, John
  • Quiggin, John

Abstract

The relative merits of different property right systems to allocate water among different extractive uses where variability of supply is important are evaluated. Three systems of property rights are considered. In the first, variable supply is dealt with through the use of water rights defined as shares of the total quantity available. In the second, there are two types of water rights, one for water with a high security of supply and the other a low-security right for the residual supply. The third is a system of state-contingent claims. With zero transaction costs, all systems are efficient. In the realistic situation where transaction costs matter, the state-contingent claims system is globally optimal, and the system with high-security and low-security rights is preferable to the system with share allocations.

Suggested Citation

  • Freebairn, John & Quiggin, John, 2005. "Water Rights for Variable Supplies," Risk and Sustainable Management Group Working Papers 149838, University of Queensland, School of Economics.
  • Handle: RePEc:ags:uqsers:149838
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    File URL: http://purl.umn.edu/149838
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    References listed on IDEAS

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    1. John Quiggin, 2006. "Repurchase of renewal rights: a policy option for the National Water Initiative ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 425-435, September.
    2. repec:mes:jeciss:v:30:y:1996:i:4:p:1212-1216 is not listed on IDEAS
    3. Pesendorfer Wolfgang, 1995. "Financial Innovation in a General Equilibrium Model," Journal of Economic Theory, Elsevier, vol. 65(1), pages 79-116, February.
    4. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521622448.
    5. Mike Young & Jim McColl, 2002. "Robust Separation:A search for a generic framework to simplify registration and trading of interests in natural resources," Natural Resource Management Economics 02_004, Policy and Economic Research Unit, CSIRO Land and Water, Adelaide, Australia.
    6. Crase, Lin & O'Reilly, Leo & Dollery, Brian, 2000. "Water markets as a vehicle for water reform: the case of New South Wales," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 44(2), June.
    7. Ross, Stephen A, 1987. "Arbitrage and Martingales with Taxation," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 371-393, April.
    8. Alaouze, Chris M, 1991. "Intertemporal Water Transfers and Drought," Australian Economic Papers, Wiley Blackwell, vol. 30(56), pages 114-127, June.
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    Citations

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    Cited by:

    1. David Adamson & Thilak Mallawaarachchi & John Quiggin, 2007. "Water use and salinity in the Murray-Darling Basin: A state-contingent model ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 263-281, September.
    2. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John C., 2006. "State-contingent modelling of the Murray Darling Basin: implications for the design of property rights," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 137977, Australian Agricultural and Resource Economics Society.
    3. David Adamson & Thilak Mallawaarachchi & John Quiggin, 2009. "Declining inflows and more frequent droughts in the Murray-Darling Basin: climate change, impacts and adaptation ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(3), pages 345-366, July.
    4. Brennan, Donna C., 2006. "Water policy reform in Australia: lessons from the Victorian seasonal water market," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), September.
    5. Karina Schoengold & David L. Sunding, 2014. "The impact of water price uncertainty on the adoption of precision irrigation systems," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 729-743, November.
    6. Xie, Yang & Zilberman, David, 2015. "Water-Storage Capacities versus Water-Use Efficiency: Substitutes or Complements?," 2015 Conference, August 9-14, 2015, Milan, Italy 211894, International Association of Agricultural Economists.
    7. John Freebairn, 2005. "Issues in the Design of Water Markets," Melbourne Institute Working Paper Series wp2005n18, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    8. Alex Coram & Lyle Noakes, 2009. "The optimal extraction of water along an arbitrarily configured river system," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(2), pages 251-264, April.
    9. Johannus Janmaat, 2011. "Water Markets, Licenses, and Conservation: Some Implications," Land Economics, University of Wisconsin Press, vol. 87(1), pages 145-159.
    10. Coram, Alex & Noakes, Lyle, 2009. "The optimal extraction of water along an arbitrarily configured river system," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(2), June.
    11. Marianne LEFEBVRE & Lata GANGADHARAN & Sophie THOYER, 2011. "Do Security-differentiated Water Rights Improve Efficiency?," Working Papers 11-14, LAMETA, Universtiy of Montpellier, revised Jun 2012.
    12. Jordi Honey-Rosés, 2009. "Reviewing the arguments for market based approaches to water distribution: a critical assessment for sustainable water management in Spain," Sustainable Development, John Wiley & Sons, Ltd., vol. 17(6), pages 357-364.

    More about this item

    Keywords

    Uncertainty; property rights; Murray-Darling; Environmental Economics and Policy; Risk and Uncertainty; D8; Q2;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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