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Irrigation, Risk Aversion, and Water Rights under Water Supply Uncertainty

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  • Li, Man
  • Xu, Wenchao
  • Rosegrant, Mark W.

Abstract

This article presents an economic model to examine optimal irrigated land allocation, water rights, and probability distribution of system risk in irrigation water supply. Results indicate that the allocative priority of water rights affects farmers’ irrigation decisions and the skewness of the distribution of the system risk is the key parameter to determine this impact. The optimal acreage of irrigated land increases with the level of the allocative priority when the system risk features a negatively skewed distribution. A higher degree of negative skewness increases divergence in farm income between senior and junior water users and consequently increases the shadow value of the allocative priority.

Suggested Citation

  • Li, Man & Xu, Wenchao & Rosegrant, Mark W., 2016. "Irrigation, Risk Aversion, and Water Rights under Water Supply Uncertainty," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235753, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:235753
    DOI: 10.22004/ag.econ.235753
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    Keywords

    Resource/Energy Economics and Policy; Risk and Uncertainty;

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