IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v78y2023icp1126-1141.html
   My bibliography  Save this article

Optimal subsidization for the adoption of new irrigation technologies

Author

Listed:
  • Mattoussi, Wided
  • Mattoussi, Foued
  • Larnaout, Afrah

Abstract

Cost-sharing subsidies partially cover the fixed costs of water-saving technologies, promoting their adoption as one of the major irrigation water demand management tools that improve on-farm irrigation system efficiency and potentially free up more water for higher-value uses in water-scarce areas. In this study, we investigate the optimal subsidization scheme in the presence of adverse selection problems where the farmer’s wealth is her private information using a theoretical model of a centralized regulatory structure. In the model, we show that the first-best investment levels can be implemented when the regulator has enough resources for subsidization. Otherwise, the outcome depends on which farmer – the high-wealth farmer or the low-wealth one – contributes more to the social welfare when confronted with their first-best investment levels. Particularly, the model’s findings suggest that an optimal subsidization scheme might involve either high or low wealth farmer’s investment level being downward distorted from their first-best levels. Furthermore, in some circumstances, if the wealth disparity is sufficiently large, it is optimal to subsidize high wealth farmers only. Overall, prioritizing economic efficiency may help conserve scarce irrigation water, but it may also conflict with social equity by denying some farmers access to public subsidies.

Suggested Citation

  • Mattoussi, Wided & Mattoussi, Foued & Larnaout, Afrah, 2023. "Optimal subsidization for the adoption of new irrigation technologies," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1126-1141.
    • Handle: RePEc:eee:ecanpo:v:78:y:2023:i:c:p:1126-1141
    DOI: 10.1016/j.eap.2023.04.020
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S031359262300070X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2023.04.020?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dinar, Ariel & Yaron, Dan, 1992. "Adoption and abandonment of irrigation technologies," Agricultural Economics, Blackwell, vol. 6(4), pages 315-332, April.
    2. Huffaker, Ray G. & Whittlesey, Norman K. & Michelsen, Ari M. & Taylor, R. Garth & McGuckin, J. Thomas, 1998. "Evaluating The Effectiveness Of Conservation Water-Pricing Programs," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(1), pages 1-8, July.
    3. Giovanni Maggi & Andres Rodriguez-Clare, 1995. "Costly Distortion of Information in Agency Problems," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 675-689, Winter.
    4. Zhang, Biao & Fu, Zetian & Wang, Jieqiong & Zhang, Lingxian, 2019. "Farmers’ adoption of water-saving irrigation technology alleviates water scarcity in metropolis suburbs: A case study of Beijing, China," Agricultural Water Management, Elsevier, vol. 212(C), pages 349-357.
    5. Pfeiffer, Lisa & Lin, C.-Y. Cynthia, 2014. "Does efficient irrigation technology lead to reduced groundwater extraction? Empirical evidence," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 189-208.
    6. Wided Mattoussi & Paul Seabright, 2014. "Cooperation against Theft: A Test of Incentives for Water Management in Tunisia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(1), pages 124-153.
    7. Chokri Dridi & Madhu Khanna, 2005. "Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 289-301.
    8. Alauddin, Mohammad & Quiggin, John, 2008. "Agricultural intensification, irrigation and the environment in South Asia: Issues and policy options," Ecological Economics, Elsevier, vol. 65(1), pages 111-124, March.
    9. David Neumark & Harry Holzer, 2000. "Assessing Affirmative Action," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 483-568, September.
    10. Bjornlund, Henning & Nicol, Lorraine & Klein, K.K., 2009. "The adoption of improved irrigation technology and management practices--A study of two irrigation districts in Alberta, Canada," Agricultural Water Management, Elsevier, vol. 96(1), pages 121-131, January.
    11. R. P. S. Malik & Mark Giordano & M. S. Rathore, 2018. "The negative impact of subsidies on the adoption of drip irrigation in India: evidence from Madhya Pradesh," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 34(1), pages 66-77, January.
    12. Macarena Dagnino & Frank Ward, 2012. "Economics of Agricultural Water Conservation: Empirical Analysis and Policy Implications," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 28(4), pages 577-600.
    13. Ariel Dinar & Dan Yaron, 1992. "Adoption and abandonment of irrigation technologies," Agricultural Economics, International Association of Agricultural Economists, vol. 6(4), pages 315-332, April.
    14. Chih-Hao Wang & Na Chen, 2021. "A multi-objective optimization approach to balancing economic efficiency and equity in accessibility to multi-use paths," Transportation, Springer, vol. 48(4), pages 1967-1986, August.
    15. Fishman, Ram & Giné, Xavier & Jacoby, Hanan G., 2023. "Efficient irrigation and water conservation: Evidence from South India," Journal of Development Economics, Elsevier, vol. 162(C).
    16. Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
    17. Scheierling, Susanne M. & Young, Robert A. & Cardon, Grant E., 2004. "Determining the Price-Responsiveness of Demands for Irrigation Water Deliveries versus Consumptive Use," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(2), pages 1-18, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Konstantinos Chatzimichael & Dimitris Christopoulos & Spiro Stefanou & Vangelis Tzouvelekas, 2020. "Irrigation practices, water effectiveness and productivity measurement [Toward an understanding of technology adoption: risk, learning, and neighborhood effects]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 47(2), pages 467-498.
    3. Xuerong Li, 2022. "Can Collecting Water Fees Really Promote Agricultural Water-Saving? Evidence from Seasonal Water Shortage Areas in South China," Sustainability, MDPI, vol. 14(19), pages 1-17, October.
    4. 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.
    5. Fanglei Zhong & Lili Li & Aijun Guo & Xiaoyu Song & Qingping Cheng & Yongnian Zhang & Xiaojiang Ding, 2019. "Quantifying the Influence Path of Water Conservation Awareness on Water-Saving Irrigation Behavior Based on the Theory of Planned Behavior and Structural Equation Modeling: A Case Study from Northwest," Sustainability, MDPI, vol. 11(18), pages 1-16, September.
    6. Koundouri, Phoebe & Nauges, Céline & Tzouvelekas, Vangelis, 2009. "The Effect of Production Uncertainty and Information Dissemination of the Diffusion of Irrigation Technologies," TSE Working Papers 09-032, Toulouse School of Economics (TSE).
    7. Hang Xu & Rui Yang & Jianfeng Song, 2021. "Agricultural Water Use Efficiency and Rebound Effect: A Study for China," IJERPH, MDPI, vol. 18(13), pages 1-16, July.
    8. Li, Haoyang & Zhao, Jinhua, 2018. "What Drives (No) Adoption of New Irrigation Technologies: A Structural Dynamic Estimation Approach," 2018 Annual Meeting, August 5-7, Washington, D.C. 274474, Agricultural and Applied Economics Association.
    9. Xie, Yang & Zilberman, David, 2015. "Water Storage Capacities versus Water Use Efficiency: Substitutes or Complements?," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205439, Agricultural and Applied Economics Association.
    10. Jordán, Cristian & Speelman, Stijn, 2020. "On-farm adoption of irrigation technologies in two irrigated valleys in Central Chile: The effect of relative abundance of water resources," Agricultural Water Management, Elsevier, vol. 236(C).
    11. Dinar, Ariel & Keck, Andrew, 1997. "Private irrigation investment in Colombia: effects of violence, macroeconomic policy, and environmental conditions," Agricultural Economics, Blackwell, vol. 16(1), pages 1-15, March.
    12. Javad Torkamani & Shahrokh Shajari, 2008. "Adoption of New Irrigation Technology Under Production Risk," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 22(2), pages 229-237, February.
    13. Gick, Wolfgang, 2015. "A Theory of Delegated Contracting," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113069, Verein für Socialpolitik / German Economic Association.
    14. Calzadilla, Alvaro & Rehdanz, Katrin & Tol, Richard S.J., 2008. "Water scarcity and the impact of improved irrigation management: A CGE analysis," Conference papers 331788, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    15. Berrittella, Maria & Rehdanz, Katrin & Tol, Richard S.J., 2006. "The Economic Impact of the South-North Water Transfer Project in China: A Computable General Equilibrium Analysis," Climate Change Modelling and Policy Working Papers 12021, Fondazione Eni Enrico Mattei (FEEM).
    16. Khalil, Fahad & Lawarree, Jacques, 2001. "Catching the agent on the wrong foot: ex post choice of monitoring," Journal of Public Economics, Elsevier, vol. 82(3), pages 327-347, December.
    17. -, 2015. "La economía del cambio climático en América Latina y el Caribe: paradojas y desafíos del desarrollo sostenible," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37310 edited by Cepal.
    18. Palatnik, Ruslana & Shechter, Mordechai, 2008. "Can Climate Change Mitigation Policy be Beneficial for the Israeli Economy? A Computable General Equilibrium Analysis," Conference papers 331792, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    19. Aguirre, Iñaki & Beitia, Arantza, 2017. "Modelling countervailing incentives in adverse selection models: A synthesis," Economic Modelling, Elsevier, vol. 62(C), pages 82-89.
    20. Berrittella, Maria & Rehdanz, Katrin & Roson, Roberto & Tol, Richard S.J., 2007. "The Economic Impact of Water Taxes: A Computable General Equilibrium Analysis with an International Data Set," Conference papers 331655, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    More about this item

    Keywords

    Asymmetric information; Centralized water management; Irrigation water; Water-saving technology; Subsidization scheme;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:78:y:2023:i:c:p:1126-1141. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.