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Assessing the Impact of Alternative Water Pricing Schemes on Income Distribution

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  • Giacomo Giannoccaro
  • Maurizio Prosperi
  • Giacomo Zanni

Abstract

The reform of water pricing policies may represent an effective instrument for enhancing the efficient use of water resource. However, policy makers fear that a change in the pricing methods may cause income loss for some farmers, and that this income inequality may generate public discontent and policy inertia. The aim of this paper was to compare some pricing methods in order to measure their effects on income distribution. The analysis focuses on the income distribution among different types of farms, and the income distribution between different social groups (landowners, capitalists and workers) in the short term. A linear programing model based on expected utility theory is used to take into account the effect of commodity prices and rainfall variability, which are among the most relevant factors affecting farmers’ income. According to the findings, water pricing schemes do not affect the income distribution among farm types, although a significant impact emerges on the distribution among social groups, and in particular on the wages of temporary workers.

Suggested Citation

  • Giacomo Giannoccaro & Maurizio Prosperi & Giacomo Zanni, 2010. "Assessing the Impact of Alternative Water Pricing Schemes on Income Distribution," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(3), pages 527-544, September.
    • Handle: RePEc:bla:jageco:v:61:y:2010:i:3:p:527-544
    DOI: 10.1111/j.1477-9552.2010.00252.x
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    3. Arno Maatman & Caspar Schweigman & Arjan Ruijs & Maarten H. van Der Vlerk, 2002. "Modeling Farmers' Response to Uncertain Rainfall in Burkina Faso: A Stochastic Programming Approach," Operations Research, INFORMS, vol. 50(3), pages 399-414, June.
    4. Tsur, Yacov & Dinar, Ariel, 1995. "Efficiency and equity considerations in pricing and allocating irrigation water," Policy Research Working Paper Series 1460, The World Bank.
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    2. Buchholz, Matthias & Holst, Gesa & Musshoff, Oliver, 2015. "Water and irrigation policy impact assessment using business simulation games: evidence from northern Germany," Department of Agricultural and Rural Development (DARE) Discussion Papers 260781, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    3. Buchholz, Matthias & Musshoff, Oliver, 2014. "The role of weather derivatives and portfolio effects in agricultural water management," Agricultural Water Management, Elsevier, vol. 146(C), pages 34-44.
    4. Portoghese, Ivan & Giannoccaro, Giacomo & Giordano, Raffaele & Pagano, Alessandro, 2021. "Modeling the impacts of volumetric water pricing in irrigation districts with conjunctive use of surface and groundwater resources," Agricultural Water Management, Elsevier, vol. 244(C).
    5. Alban Lika & Francesco Galioto & Davide Viaggi, 2017. "Water Authorities’ Pricing Strategies to Recover Supply Costs in the Absence of Water Metering for Irrigated Agriculture," Sustainability, MDPI, vol. 9(12), pages 1-16, November.

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