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Input use and capacity constraint under uncertainty : the case of irrigation

Author

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  • Bontems, P.
  • Favard, P.

Abstract

In this paper we consider a two periods model of cropping using irrigation. The farmer takes two kind of decisions, one related to the level of investment in irrigation capacity and the other one to the irrigation level in each period. In the first period, decisions are taken under uncertainty on the rainfall level which is resolved at the beginning of the second period. Assuming a CARA utility function, the total water use is non monotonic with respect to the price of investment. Indeed, taxing capital may induce the farmer to increase the total level of irrigation despite that the irrigation capacity decreases. Surprisingly, the impact of an increase of water price is generally ambiguous even assuming risk neutrality. ...French Abstract : Les auteurs étudient, dans cet article, un modèle de culture irriguée à 2 périodes. L'agriculteur prend deux types de décisions, l'une reliée au niveau d'investissement en capacité d'irrigation et l'autre reliée au niveau d'apport d'eau dans chaque période. Au début de la 1ère période, les décisions sont prises en présence d'incertitude quant au niveau effectif des pluies, qui est connu au début de la 2nd période. Sous l'hypothèse de préférences vis-à-vis du risque de type CARA, les auteurs montrent que taxer l'investissement en capital peut induire un accroissement du niveau d'irrigation préventive bien que le niveau d'investissement décroisse. Par ailleurs, dans le cas d'une fonction de production agricole de type logistique, le montant total d'eau consommée est non monotone par rapport au prix unitaire de l'investissement. Ainsi, taxer le capital peut induire l'agriculteur à augmenter l'apport d'eau total par irrigation alors que la capacité d'irrigation décroît. Enfin, de manière surprenante, une augmentation du prix de l'eau conduit en général à des résultats ambigus même en supposant la neutralité vis-à -vis du risque.

Suggested Citation

  • Bontems, P. & Favard, P., 2002. "Input use and capacity constraint under uncertainty : the case of irrigation," Economics Working Paper Archive (Toulouse) 37, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
  • Handle: RePEc:rea:inrawp:37
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    File URL: http://www.toulouse.inra.fr/centre/esr/wpRePEc/bon200208.pdf
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    More about this item

    Keywords

    IRRIGATION; INVESTMENT; UNCERTAINTY AND RISK AVERSION ; IRRIGATION; RISQUE; INVESTISSEMENT;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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