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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
    DOI: 10.22004/ag.econ.149838
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    References listed on IDEAS

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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. Guerrero-Baena, M. Dolores & Villanueva, Anastasio J. & Gómez-Limón, José A. & Glenk, Klaus, 2019. "Willingness to pay for improved irrigation water supply reliability: An approach based on probability density functions," Agricultural Water Management, Elsevier, vol. 217(C), pages 11-22.
    3. 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.
    4. David Adamson & Thilak Mallawaarachchi & John Quiggin, 2006. "State-contingent modelling of the Murray Darling Basin: implications for the design of property rights," Murray-Darling Program Working Papers WP2M06, Risk and Sustainable Management Group, University of Queensland.
    5. Smith, Steven M., 2021. "The relative economic merits of alternative water right systems," Journal of Environmental Economics and Management, Elsevier, vol. 105(C).
    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. 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.
    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), pages 1-14.
    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. 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), pages 1-21, September.
    13. Mallawaarachchi, Thilak & Auricht, Christopher & Loch, Adam & Adamson, David & Quiggin, John, 2020. "Water allocation in Australia’s Murray–Darling Basin: Managing change under heightened uncertainty," Economic Analysis and Policy, Elsevier, vol. 66(C), pages 345-369.
    14. 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.
    15. Delorit, Justin D. & Parker, Dominic P. & Block, Paul J., 2019. "An agro-economic approach to framing perennial farm-scale water resources demand management for water rights markets," Agricultural Water Management, Elsevier, vol. 218(C), pages 68-81.
    16. 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.

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    More about this item

    Keywords

    Environmental Economics and Policy; Risk and Uncertainty;

    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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