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Estimating Dairy Farms’ Demand for Water

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  • Kravchenko, Alexey

Abstract

Resource Management's Act current “first come first served” method of distributing water rights is fast becoming inadequate to handle this increasingly over-allocated factor of production. Water markets or tariffs are one way to achieve allocative efficiency. To establish such markets or tariffs, it is imperative to estimate users’ responses to having, for the first time, to pay for this currently largely unpriced input. This study seeks to provide a viable “starting point” estimate of the response curve to water price tariffs of dairy farmers – NZ’s largest fresh water consumers – using the MPI dairy monitoring dataset. This paper suggests that under the assumptions of inelastic input substitutability, the farms’ supply curves can provide an approximation of the farms’ responses to at-site (irrigation cost inclusive) changes of water costs.

Suggested Citation

  • Kravchenko, Alexey, 2012. "Estimating Dairy Farms’ Demand for Water," 2012 Conference, August 31, 2012, Nelson, New Zealand 136048, New Zealand Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:nzar12:136048
    DOI: 10.22004/ag.econ.136048
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    References listed on IDEAS

    as
    1. Tauer, Loren W., 1998. "Estimates of Individual Dairy Farm Supply Elasticities," Working Papers 179370, Cornell University, Department of Applied Economics and Management.
    2. Arthur Grimes & Andrew Aitken, 2008. "Water, Water Somewhere: The Value of Water in a Drought-Prone Farming Region," Working Papers 08_10, Motu Economic and Public Policy Research.
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    More about this item

    Keywords

    Agribusiness; Agricultural and Food Policy; Crop Production/Industries; Demand and Price Analysis; Environmental Economics and Policy; Farm Management; Land Economics/Use; Production Economics;
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