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Irrigation Technology Investment When The Price Of Water Is Stochastic

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  • Moreno, Georgina
  • Sunding, David L.

Abstract

The paper considers the effect of changes in the distribution of water price on the incentives to adopt water-conserving irrigation technologies. A two-stage decision model is developed wherein agents make long-term decisions about irrigation technology investments and decide production levels based on short-term realizations of water price. Comparative statics results show that the impact of changes in the distribution of water price hinge on the responsiveness of cultivated acreage to fluctuations in the price of water. The model is tested using data on irrigation technology investment from California's San Joaquin Valley. Econometric results strongly support the conceptual model, and show that changes in the distribution of water price have systematically different impacts on permanent and annual crops.

Suggested Citation

  • Moreno, Georgina & Sunding, David L., 2000. "Irrigation Technology Investment When The Price Of Water Is Stochastic," 2000 Annual meeting, July 30-August 2, Tampa, FL 21730, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea00:21730
    DOI: 10.22004/ag.econ.21730
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    References listed on IDEAS

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    1. David Zilberman & Doug Parker, 1996. "Explaining Irrigation Technology Choices: A Microparameter Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1064-1072.
    2. Green, Gareth P. & Sunding, David L., 1997. "Land Allocation, Soil Quality, And The Demand For Irrigation Technology," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(2), pages 1-9, December.
    3. Margriet Caswell & Erik Lichtenberg & David Zilberman, 1990. "The Effects of Pricing Policies on Water Conservation and Drainage," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(4), pages 883-890.
    4. Margriet Caswell & David Zilberman, 1985. "The Choices of Irrigation Technologies in California," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(2), pages 224-234.
    5. Margriet F. Caswell & David Zilberman, 1986. "The Effects of Well Depth and Land Quality on the Choice of Irrigation Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 798-811.
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    Cited by:

    1. 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.

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