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Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information

Author

Listed:
  • Chokri Dridi

    (University of Illinois at Urbana-Champaign)

  • Madhu Khanna

    (University of Illinois at Urbana-Champaign)

Abstract

We develop a water allocation and irrigation technology adoption model under the prior appropriation doctrine with asymmetric information among heterogeneous farmers and between farmers and water authorities; farmers’ heterogeneity is defined by a mix of land quality and knowledge. We find that adverse selection reduces the adoption of modern irrigation technology. We also show that even with asymmetric information, incentives for water trade exist and lead to additional technology adoption with gains to all parties. This suggests that under asymmetric information, a thin secondary market improves the allocation of water resources and induces additional adoption of modern irrigation technologies.

Suggested Citation

  • Chokri Dridi & Madhu Khanna, 2004. "Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information," Others 0409005, EconWPA.
  • Handle: RePEc:wpa:wuwpot:0409005
    Note: Type of Document - pdf; pages: 35. Forthcoming in: American Journal of Agricultural Economics
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    References listed on IDEAS

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    1. David Zilberman & Neal Macdougall & Farhed Shah, 1994. "Changes In Water Allocation Mechanisms For California Agriculture," Contemporary Economic Policy, Western Economic Association International, vol. 12(1), pages 122-133, January.
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    3. Khanna, Madhu & Isik, Murat & Zilberman, David, 2002. "Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 27(2), August.
    4. Livingston, Marie Leigh & DEC, 1993. "Designing water institutions : market failures and institutional response," Policy Research Working Paper Series 1227, The World Bank.
    5. Burness, H Stuart & Quirk, James P, 1980. "Water Law, Water Transfers, and Economic Efficiency: The Colorado River," Journal of Law and Economics, University of Chicago Press, vol. 23(1), pages 111-134, April.
    6. Janis M. Carey & David Zilberman, 2002. "A Model of Investment under Uncertainty: Modern Irrigation Technology and Emerging Markets in Water," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 171-183.
    7. Gresik, Thomas A., 1991. "Ex ante efficient, ex post individually rational trade," Journal of Economic Theory, Elsevier, vol. 53(1), pages 131-145, February.
    8. R. Maria Saleth & John B. Braden & J. Wayland Eheart, 1991. "Bargaining Rules for a Thin Spot Water Market," Land Economics, University of Wisconsin Press, vol. 67(3), pages 326-339.
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    Citations

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    Cited by:

    1. Gine,Xavier & Jacoby,Hanan G. & Gine,Xavier & Jacoby,Hanan G., 2016. "Markets, contracts, and uncertainty in a groundwater economy," Policy Research Working Paper Series 7694, The World Bank.
    2. Sauer, Johannes & Zilberman, David, 2009. "Innovation Behaviour At Farm Level – Selection And Identification," 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland 51073, Agricultural Economics Society.
    3. Sauer, Johannes & Zilberman, David D., 2009. "Innovation behaviour at micro level - selection and identification," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6t49r0fh, Department of Agricultural & Resource Economics, UC Berkeley.
    4. repec:spr:waterr:v:31:y:2017:i:9:d:10.1007_s11269-017-1666-x is not listed on IDEAS
    5. Dridi, Chokri & Khanna, Madhu, 2005. "Political Economy and Irrigation Technology Adoption Implications of Water Pricing under Asymmetric Information," 2005 Annual meeting, July 24-27, Providence, RI 19348, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Xie, Yang & Zilberman, David, 2014. "The Economics of Water Project Capacities and Conservation Technologies," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169820, Agricultural and Applied Economics Association.
    7. Veettil, Prakashan Chellattan & Speelman, Stijn & Frija, Aymen & Buysse, Jeroen & van Huylenbroeck, Guido, 2011. "Complementarity between water pricing, water rights and local water governance: A Bayesian analysis of choice behaviour of farmers in the Krishna river basin, India," Ecological Economics, Elsevier, vol. 70(10), pages 1756-1766, August.
    8. Margarita Genius & Phoebe Koundouri & Celine Nauges & Vangelis TZOUVELEKAS, "undated". "Information Spillovers in Irrigation Technology Diffusion: Social Learning, Extension Visits and Spatial Effects," DEOS Working Papers 1319, Athens University of Economics and Business.
    9. Margarita Genius & Phoebe Koundouri & Céline Nauges & Vangelis Tzouvelekas, 2014. "Information Transmission in Irrigation Technology Adoption and Diffusion: Social Learning, Extension Services, and Spatial Effects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(1), pages 328-344.
    10. Rishi Ram Kattel, "undated". "Rainwater Harvesting and Rural Livelihoods in Nepal," Working papers 102, The South Asian Network for Development and Environmental Economics.
    11. Swallow, Kimberly A. & Swallow, Brent M., 2015. "Explicitly integrating institutions into bioeconomic modeling:," IFPRI discussion papers 1420, International Food Policy Research Institute (IFPRI).
    12. Phoebe Koundouri & Celine Nauges & Vangelis TZOUVELEKAS, "undated". "The Effect Of Production Uncertainty And Information Dissemination On The Diffusion Of Irrigation Technologies," DEOS Working Papers 1009, Athens University of Economics and Business.
    13. Wasantha Athukorala & Clevo Wilson, 2017. "Distributional impacts of irrigation-induced agricultural development in a semi-subsistence economy: new evidence," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(1), pages 59-75, January.
    14. Viaggi, D. & Raggi, M. & Bartolini, F. & Gallerani, V., 2010. "Designing contracts for irrigation water under asymmetric information: Are simple pricing mechanisms enough?," Agricultural Water Management, Elsevier, vol. 97(9), pages 1326-1332, September.
    15. Konstantinos Chatzimichael & Dimitris Christopoulos & Spyro Stefanou & Vangelis Tzouvelekas, 2015. "Irrigation Technology Adoption, Water Effectiveness and Productivity Measurement," Working Papers 1506, University of Crete, Department of Economics.
    16. Konstantinos Chatzimichael & Dimitris Christopoulos & Spiro Stefanou & Vangelis Tzouvelekas, 2017. "Irrigation Practices, Water Effectiveness and Productivity Measurement," Working Papers 1702, University of Crete, Department of Economics.

    More about this item

    Keywords

    Asymmetric information; Irrigation technology; Technology adoption; Water trading.;

    JEL classification:

    • P - Economic Systems
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Z - Other Special Topics

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