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Regulating water extraction in a river basin with upstream-downstream communities

Author

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  • Mette Kildegaard Graversen

    (Institute of Food and Resource Economics, University of Copenhagen)

Abstract

This paper proposes a tax mechanism modelled for water extraction in a river system with upstream and downstream farmers. The tax mechanism is based on the regulator’s own estimation of aggregate extraction and for that reason the tax addresses the problem of asymmetric information. It is demonstrated that the tax mechanism ensures approximately correct marginal extraction incentives for the individual farmer. Consequently, it is concluded that the tax mechanism proposed here has a practical application.

Suggested Citation

  • Mette Kildegaard Graversen, 2011. "Regulating water extraction in a river basin with upstream-downstream communities," IFRO Working Paper 2011/2, University of Copenhagen, Department of Food and Resource Economics.
    • Handle: RePEc:foi:wpaper:2011_2
    as

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    File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2011/WP_2011_2_regulating_water_extraction.pdf
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    References listed on IDEAS

    as
    1. Neher,Philip A., 1990. "Natural Resource Economics," Cambridge Books, Cambridge University Press, number 9780521311748, January.
    2. Tsur, Yacov & Dinar, Ariel, 1997. "The Relative Efficiency and Implementation Costs of Alternative Methods for Pricing Irrigation Water," The World Bank Economic Review, World Bank, vol. 11(2), pages 243-262, May.
    3. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 113-126, March.
    4. Loehman Edna & Dinar Ariel, 1994. "Cooperative Solution of Local Externality Problems: A Case of Mechanism Design Applied to Irrigation," Journal of Environmental Economics and Management, Elsevier, vol. 26(3), pages 235-256, May.
    5. Lars Hansen, 1998. "A Damage Based Tax Mechanism for Regulation of Non-Point Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 12(1), pages 99-112, July.
    6. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
    7. Johansson, Robert C., 2000. "Pricing irrigation water : a literature survey," Policy Research Working Paper Series 2449, The World Bank.
    8. Sampath, Rajan K., 1992. "Issues in irrigation pricing in developing countries," World Development, Elsevier, vol. 20(7), pages 967-977, July.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Lisa Huber & Nico Bahro & Georg Leitinger & Ulrike Tappeiner & Ulrich Strasser, 2019. "Agent-Based Modelling of a Coupled Water Demand and Supply System at the Catchment Scale," Sustainability, MDPI, vol. 11(21), pages 1-15, November.

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