Using proportional modeling to evaluate irrigator preferences for market‐based water reallocation

Abstract

Irrigators' policy preferences for water reallocation programs usually take the form of proportional data, where one option will be relatively more or less favored than another in the composition of a government's total budget apportionment to address water reform. This study applies a zero-one inflated beta regression to model Murray-Darling Basin irrigators' preferences for market-based water policy programs. Market-based arrangements are more likely to provide efficient solutions to water reallocation problems, particularly where future uncertainty and appropriate pricing induce irrigator preferences for such programs. Our modeling of drivers of irrigator preferences for government expenditure on market-based programs identified different determinants of zero (a corner solution) and proportional outcomes for the reallocation of Murray-Darling Basin water. In addition, the proportional modeling identifies some variables (namely, state regional influences, the type of farm production and recent debt, low income, or water allocation stressors) that increase engagement with market-based programs. Interestingly, while price variables are important and statistically significant, they appear to be less relevant to program engagement than other influences. JEL classifications: Q18, Q25, Q28, Q50

Reviewing the decision‐making behavior of irrigators

“…This is especially true of current investments into water use efficiency projects in the Murray–Darling Basin of southern Australia. Total investments funding is around AU$8.9 billion over 10 years, but to date roughly 600 gigaliters has been recovered at a cost of up to AU$15,000/megaliter; where market prices averaged AU$1,500/megaliter over the same period (Loch, Boxall, & Wheeler, ). Loch et al () also showed that irrigator preferences were not considered during the political process aimed at ceasing market buyback alternatives to efficiency investments, where approximately 45% of irrigators were willing to engage if provided the opportunity.…”

“…Total investments funding is around AU$8.9 billion over 10 years, but to date roughly 600 gigaliters has been recovered at a cost of up to AU$15,000/megaliter; where market prices averaged AU$1,500/megaliter over the same period (Loch, Boxall, & Wheeler, ). Loch et al () also showed that irrigator preferences were not considered during the political process aimed at ceasing market buyback alternatives to efficiency investments, where approximately 45% of irrigators were willing to engage if provided the opportunity. This also created stranded assets or “swiss cheese effect” in many places because of farmers exiting from the industry and leaving the infrastructure underutilized (Loch et al, ).…”