Three approaches to measuring natural resource scarcity: theory and application to groundwater
Efficient pricing of a resource incorporates both marginal cost of extraction and scarcity rents. Since groundwater resources exhibit natural supply constraints, scarcity rents must be imposed on current users. Given the difficulty of establishing clear groundwater ownership rights, scarcity value frequently goes unrecognized and is difficult to estimate. This results in inefficient pricing and misallocation of the resource. This thesis builds on three different methods to develop appropriate theoretical and empirical models relevant for indirect estimation of these shadow scarcity rents, which we consider as the initial and most challenging step towards efficient groundwater management. Empirical analyses are based on economic and hydrological data from t he island of Cyprus, representative of semi-arid regions. Chapter 2 critically assesses previous theoretical and empirical attempts to derive the increase in social benefits from efficient pricing of groundwater and examines the potential for groundwater management. This potential is seriously challenged by Gisser-Sanchez's Effect (GSI): i.e. net benefits from optimally managing groundwater are insignificant for all practical purposes. Chapter 3 attempts a reexamination of GSI by developing a dynamic model of adaptation to increasing groundwater scarcity, when backstop technology is available. Both groundwater scarcity rents and management benefits are derived by simulating the optimal and competitive-commonality solutions. Results point to the absence of GSI in aquifers facing complete exhaustion in the near future. Chapter 4 proposes a refinement of revealed preference methods of valuation, by combining the hedonic and travel cost methods, and applies the refined model to derive the willingness to pay for groundwater quality. It is claimed t hat hedonic valuation of quality attributes can be misleading when the exogeneity assumption, with respect to these attributes, to sample selection is violated. Hence, the simultaneity between hedonic valuation and sample selection is modelled in the context of producer behaviour and investigated empirically in the case of land demanded for use as an input either in agricultural production or touristic development. The empirical analysis suggests that failing to correct for sample selection results in a biased valuation of groundwater quality. In chapter 5 duality theory is employed to develop the distance function methodology of deriving shadow groundwater scarcity rents. The empirical application of the model involves estimating a stochastic input distance function from which the in situ shadow price of groundwater is derived. Chapter 6 concludes the thesis by comparing and contrasting the magnitude of groundwater scarcity rents and willingness to pay for scarce groundwater quality, derived from the models put forward in this research.
|Date of creation:||24 Oct 2000|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
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.:
- Van Der Ploeg, F., 1987. "Inefficiency of credible strategies in oligopolistic resource markets with uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 11(1), pages 123-145, March.
- Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 3-61.
- Chermak, Janie M. & Patrick, Robert H., 2001. "A Microeconometric Test of the Theory of Exhaustible Resources," Journal of Environmental Economics and Management, Elsevier, vol. 42(1), pages 82-103, July.
- James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
- Berck, Peter & Perloff, Jeffrey M, 1982.
"An Open-Access Fishery with Rational Expectations,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt876499mq, Department of Agricultural & Resource Economics, UC Berkeley.
- Tsur, Yacov & Graham-Tomasi, Theodore, 1991. "The buffer value of groundwater with stochastic surface water supplies," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 201-224, November.
- Weitzman, Martin L., 1974. "Free access vs private ownership as alternative systems for managing common property," Journal of Economic Theory, Elsevier, vol. 8(2), pages 225-234, June.
- Wirl, Franz & Dockner, Engelbert, 1995. "Leviathan governments and carbon taxes: Costs and potential benefits," European Economic Review, Elsevier, vol. 39(6), pages 1215-1236, June.
- Smith, Vernon L, 1969. "On Models of Commercial Fishing," Journal of Political Economy, University of Chicago Press, vol. 77(2), pages 181-98, March/Apr.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Tsutsui, Shunichi & Mino, Kazuo, 1990. "Nonlinear strategies in dynamic duopolistic competition with sticky prices," Journal of Economic Theory, Elsevier, vol. 52(1), pages 136-161, October.
- Worthington, Virginia E. & Burt, Oscar R. & Brustkern, Richard L., 1985. "Optimal management of a confined groundwater system," Journal of Environmental Economics and Management, Elsevier, vol. 12(3), pages 229-245, September.
- Halvorsen, Robert & Smith, Tim R, 1984. "On Measuring Natural Resource Scarcity," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 954-64, October.
- A. Michael Spence, 1979. "Investment Strategy and Growth in a New Market," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 1-19, Spring.
- R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 29-45.
- Spulber, Daniel F., 1980. "Research and development of a backstop energy technology in a growing economy," Energy Economics, Elsevier, vol. 2(4), pages 199-207, October.
- Ahrens, W. Ashley & Sharma, Vijaya R., 1997. "Trends in Natural Resource Commodity Prices: Deterministic or Stochastic?," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 59-74, May.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:38265. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.