Price elasticity reconsidered: Panel estimation of an agricultural water demand function

Schoengold, Karina; Sunding, David L.; Moreno, Georgina

doi:10.1029/2005wr004096

Cited by 119 publications

(91 citation statements)

References 34 publications

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“…According to Dinar and Subramanian (1998) water pricing encourages water users to utilize this valuable resources more wisely by giving them information on water's economic, or scarcity value. Schoengold et al (2006) confirmed that an increase in marginal water price leads to reduced water application and may encourage a shift in cropping patterns. In contrast, Molle (2008) argues that the potential of pricing irrigation water to improve water allocation and regulate water use is often lower than expected.…”

Section: Introductionsupporting

confidence: 53%

Irrigation in the Tarim Basin, China: farmers’ response to changes in water pricing practices

et al. 2014

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The extremely arid Tarim Basin in northwestern China is an important cotton and fruit production region. However, extensive agricultural land reclamation combined with unreasonable water use in recent decades resulted in degradation of ecosystems along the Tarim River. With declining water availability, it is becoming increasingly important to utilize this essential resource more efficiently. Water pricing is considered an effective way to advance water allocation and water conservation. To identify whether a strong increase in water price may lead to a wiser agricultural water use along Tarim River, 128 farmers were interviewed with structured questionnaire in different parts of the Basin. Multinomial logistic regression was employed to explain the factors influencing farmers' reaction towards a strong increase in water price. The results show that under increased water price less than half of the interviewed farmers would opt for decisions that lead to improved water use efficiency. Moreover, the price increase might lead to a further expansion of groundwater exploitation in the region. Fruit farmers, as well as farmers with less land and less cash income are reluctant to adopt advanced irrigation technology or improve their crop production in reaction to increased water price. It was furthermore revealed that the experience of slight water shortage in the past created awareness by farmers to use water more wisely. It is concluded that the sole increase of water price is not a viable option; an integrated approach is necessary, in which creation of awareness and improving agronomic skills of farmers play a key role to overcome the tight water situation and realize a more efficient use of water.

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Section: Introductionsupporting

confidence: 53%

Irrigation in the Tarim Basin, China: farmers’ response to changes in water pricing practices

et al. 2014

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“…Despite the policy significance and conceptual simplicity, there are few empirical studies that have estimated α (Appels et al, 2004: Schoengold et al, 2005. The major reason for the lack of such studies is due to the paucity of data on observed market prices and quantities of water traded (Appels, 2004;Brookshire et al, 2004).…”

Section: Introductionmentioning

confidence: 99%

“…The major reason for the lack of such studies is due to the paucity of data on observed market prices and quantities of water traded (Appels, 2004;Brookshire et al, 2004). Therefore, most studies have used simulated data in estimating α (Appels, 2004;Schoengold et al, 2005) and are not based on observed farmers' behavior. Appels et al (2004) comprehensively reviewed studies undertaken between 1986 and 2004 on responsiveness of demand for irrigation water.…”

Section: Introductionmentioning

confidence: 99%

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Temporary Water Markets in Oman

Zekri

Kotagama

Boughanmi

2006

Jour. Agri. & Mar. Scie.

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Market vis-à-vis command and control approaches have been widely adopted in natural resource and environmental management since the 1980s. Adoption of markets in managing irrigation water resources is also emerging. It has been argued that markets are ineffective in managing the demand for irrigation water due to very low price elasticity. Most studies have been based on mathematical models simulating water markets and not on observed prices and quantities in real water markets since such data are rarely available. In Oman, perhaps in response to the extreme scarcity of water, elaborate water demand management institutions emulating markets have evolved and have been used for centuries. Water entitlements are leased based on prices through a community auction. The traded quantities of water and related prices have been recorded. This study uses this unique data set to estimate the elasticity of irrigation water. A log function on quantity and price of irrigation water is used with dummy variables on time and type of irrigation system. The price elasticity varies from -0.10 to -0.28, depending on the specifications of the econometric model. These estimates are higher than most estimates reported in past studies, , indicating the efficacy of the indigenous market-based irrigation water management institution adopted in Oman.

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“…According to Dinar and Subramanian (1998), water pricing could reveal the economic and scarcity value of this valuable resource and encourages water users to utilize water resources more wisely (Dinar and Subramanian, 1998). Furthermore, prices could guide farmers to adopt irrigation technologies with high irrigation efficiency or to change to a more productive cropping pattern (Adusumilli et al, 2011;Schoengold et al, 2006).…”

Section: Introductionmentioning

confidence: 99%

Is irrigation water price an effective leverage for water management? An empirical study in the middle reaches of the Heihe River basin

Zhou

Zhang

2015

Physics and Chemistry of the Earth, Parts A/B/C

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a b s t r a c tSerious water scarcity, low water-use efficiency, and over-exploitation of underground water have hindered socio-economic development and led to environmental degradation in the Heihe River basin, northwestern China. Price leveraging is an important tool in water demand management, and it is considered to be effective in promoting water conservation and improving water use efficiency on the premise that water demand is elastic. In the present study, we examine whether price is an effective and applicable instrument for restraining the increasing demand for agricultural irrigation water in the middle reaches of the Heihe River basin and how will it affect farmers' decisions on irrigation and crop structure. Specifically, the price elasticity of agricultural water demand was estimated based on the irrigation water demand function. The results show that the agricultural irrigation water price is statistically significant, but its elasticity is very low under current low water price. Price leverage cannot play a significant role in the context of the current pricing regime and farmers' response to price increase is intrinsically weak. To create incentives for conserving water and improving irrigation efficiency, price mechanism should be accompanied with clearly defined and legally enforceable water rights, restricted water quota measures, and reform of water authorities and water-user associations. Furthermore, increases of surface irrigation water price may lead to the over-withdrawal of groundwater, consequently, effective groundwater licensing and levying must take place to limit the total volume of groundwater withdrawal. In all, improving irrigation efficiency through better management and the adoption of water-saving technologies is the ultimate way to deal with the challenges facing irrigated agriculture in the middle reaches of the Heihe River basin.

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Price elasticity reconsidered: Panel estimation of an agricultural water demand function

Cited by 119 publications

References 34 publications

Irrigation in the Tarim Basin, China: farmers’ response to changes in water pricing practices

Irrigation in the Tarim Basin, China: farmers’ response to changes in water pricing practices

Temporary Water Markets in Oman

Is irrigation water price an effective leverage for water management? An empirical study in the middle reaches of the Heihe River basin

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