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Assessing the direct economic effects of reallocating irrigation water to alternative uses : concepts and an application


  • Scheierling, Susanne M.


Irrigation water reallocations are playing an increasingly important role in both developed and developing countries. With growing urban and environmental water demands, rising costs for the development of new water supplies, and irrigated agriculture usually including the least economically valuable use of water, transfers of irrigation water to alternative uses are increasing. However, such reallocations are often controversial, and it is often questioned whether the benefits resulting from these transactions are large enough to outweigh the associated costs. This paper reviews the experience with irrigation water transfers, including the involvement of the World Bank. It discusses the problems of assessing the direct economic effects of reallocations, with a focus on the foregone direct benefits in irrigated agriculture. Because foregone direct benefits cannot easily be directly observed, they need to be estimated. However, assessments have shown widely differing estimates -- even when the same methodology was used. The paper reviews the methodologies and model specifications used for estimating foregone direct benefits; illustrates the impact of different model specifications on the magnitude of estimates of foregone direct benefits based on an application in an example case; and draws conclusions with regard to future efforts in assessing reallocation effects, including calculating adequate compensation for farmers. Because estimating the direct benefits of irrigation expansion is methodologically equivalent to estimating foregone direct benefits from reduced irrigation water supplies, the findings have implications for a broader range of water allocation decisions.

Suggested Citation

  • Scheierling, Susanne M., 2011. "Assessing the direct economic effects of reallocating irrigation water to alternative uses : concepts and an application," Policy Research Working Paper Series 5797, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5797

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    References listed on IDEAS

    1. Rashid Hassan & James Thurlow, 2011. "Macro–micro feedback links of water management in South Africa: CGE analyses of selected policy regimes," Agricultural Economics, International Association of Agricultural Economists, vol. 42(2), pages 235-247, March.
    2. Goodman, D. Jay, 2000. "More Reservoirs Or Transfers? A Computable General Equilibrium Analysis Of Projected Water Shortages In The Arkansas River Basin," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December.
    3. Jedidiah Brewer & Robert Glennon & Alan Ker & Gary Libecap, 2007. "Water Markets in the West: Prices, Trading, and Contractual Forms," ICER Working Papers 30-2007, ICER - International Centre for Economic Research.
    4. Taylor, R. Garth & Young, Robert A., 1995. "Rural-To-Urban Water Transfers: Measuring Direct Foregone Benefits Of Irrigation Water Under Uncertain Water Supplies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(02), December.
    5. Roe, Terry & Dinar, Ariel & Tsur, Yacov & Xinshen Diao, 2005. "Feedback links between economy-wide and farm-level policies : application to irrigation water management in Morocco," Policy Research Working Paper Series 3550, The World Bank.
    6. Noelwah R. Netusil & Thomas R. Harris & Chang K. Seung & Jeffrey E. Englin, 2000. "Impacts of water reallocation: A combined computable general equilibrium and recreation demand model approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 34(4), pages 473-487.
    7. Dinar, Ariel & Rosegrant, Mark W. & Meinzen-Dick, Ruth, 1997. "Water allocation mechanisms : principles and examples," Policy Research Working Paper Series 1779, The World Bank.
    8. Espey, Molly, 2005. "BOOK REVIEW: Robert A. Young. Determining the Economic Value of Water: Concepts and Methods," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 23(2).
    9. Scheierling, Susanne M. & Young, Robert A., 2010. "Measuring Foregone Direct Benefits of Irrigation Water Transfers: The Effect of Model Specification," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61884, Agricultural and Applied Economics Association.
    10. Steven Renzetti, 2005. "Book Review: Robert A. Young (2005), Determining the Economic Value of Water: Concepts and Methods. Resources for the Future. Washington, DC, USA. xv+356 pp. $39.00. ISBN 1 891853 98 8," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(3), pages 439-441, November.
    11. World Bank, 2004. "Water Resources Sector Strategy : Strategic Directions for World Bank Engagement," World Bank Publications, The World Bank, number 15013.
    12. Scheierling, Susanne M. & Young, Robert A. & Cardon, Grant E., 2004. "Determining the Price-Responsiveness of Demands for Irrigation Water Deliveries versus Consumptive Use," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(02), August.
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    Water Conservation; Water Economics; Water Policy&Governance; Irrigation and Drainage; Natural Resources Management;

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