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Pages 120-152

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From page 120...
... 120 The Economics of Agricultural Water Use and the Role of Prices David Sunding Agricultural production depends heavily on the nature of the local environment. Factors such as soil permeability, slope, and microclimate have a large effect on yield and water use.
From page 121...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 121 0 1 0 0 0 1≤ = ≤ ≤ > < h h h and hi i ( )
From page 122...
... 122 WATER CONSERVATION, REUSE, AND RECYCLING sider first the role of land quality. The marginal impact on profits under technology i of a change in a is as follows: (4)
From page 123...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 123 At some level of land quality, all else being equal, the identity of the highestprofit technology will change. This level of land quality is called the switch point ( a s )
From page 125...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 125 percentages of adoption among states or counties. Previous empirical studies have not been able to match technology choice on a one-to-one basis with microlevel variables, such as water-holding capacity, field gradient and size, water price, and water supply source.
From page 126...
... 126 WATER CONSERVATION, REUSE, AND RECYCLING (13) β β ε ε' ' .i j j oj ijX X− > −0 To estimate the model parameters, it is necessary to choose a distribution for the eij 's and, thus, the distribution of the difference of the error terms.
From page 127...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 127 TABLE 1 Irrigation and Acreage by Crop Percentage of Acreage by Irrigation Technology Crop Acreage Furrow Sprinkler Drip Citrus 2,065 15 1 84 Deciduous 11,700 27 33 40 Grapes 23,665 61 2 37 Truck Crops 27,283 11 86 3 Total 74,713 30 37 33 The data on crop choice, irrigation technology, price of water, and water source were collected by the District. The study considers four crop categories: truck crops, citrus trees, deciduous trees, and grape vineyards.
From page 128...
... 128 WATER CONSERVATION, REUSE, AND RECYCLING component of the District charge for surface water is set so that the total price for ground and surface water is approximately the same, ranging from $50 to $110 per acre-foot. The Kern County Natural Resource Conservation Service collected data on soil permeability and field slope to define land quality for each quarter section.
From page 129...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 129 Estimation Results The Limdep statistical package is used to estimate the parameters of the model using maximum likelihood estimation and Newton's method. We report the coefficients, asymptotic t-statistics, and three statistical tests to evaluate the performance of the model.
From page 130...
... 130 T A B L E 2 Es tim at io n R es ul ts , E la st ic iti es a nd P ro ba bi lit ie s Es tim at io n R es ul ts a El as tic iti es b V ar ia bl e Sp rin kl er D rip Fu rr ow Sp rin kl er D rip C on st an t 1.
From page 131...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 131 in the sprinkler equation is negative. Figure 2 shows the change in the probability of adoption as a function of the price of water, with all other variables set at their mean values.
From page 132...
... 132 WATER CONSERVATION, REUSE, AND RECYCLING shows that truck crops are grown largely under sprinkler irrigation. However, potato growers in the District are now beginning to convert to low-pressure systems (especially drip tape)
From page 133...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 133 technologies are less likely to be adopted on fields with surface water supplies rather than groundwater supplies on the assumption that surface water is supplied at lower pressure than groundwater. The statistical results show that sprinkler adoption is less likely in areas with surface water supplies, but that drip adoption is more likely with surface supplies.
From page 134...
... 134 WATER CONSERVATION, REUSE, AND RECYCLING for the influence of crop type on adoption behavior, and which have inadequately measured physical characteristics and water prices by relying on regional data. WATER ALLOCATION MECHANISMS AND AGRICULTURAL WATER USE In many regions of the United States, water allocation has been based on queuing systems rather than on markets.
From page 135...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 135 Price FIGURE 4 Queuing versus markets.
From page 136...
... 136 WATER CONSERVATION, REUSE, AND RECYCLING a queuing system, or that WA+WU> W*
From page 138...
... 138 WATER CONSERVATION, REUSE, AND RECYCLING FIGURE 5 Output effect of transition to markets. Marginal output Ptehl hl fe em A L A B Units of water water, and they also must pay to adopt the new technology, since doing so is now optimal.
From page 139...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 139 then transaction costs per acre exceed the per acre change in output plus the cost of adopting the optimal modern technology less the cost savings of senior owners not adopting the conventional technology. In this case, water markets are inefficient.
From page 140...
... 140 WATER CONSERVATION, REUSE, AND RECYCLING The first order conditions are (25)
From page 142...
... 142 WATER CONSERVATION, REUSE, AND RECYCLING mendous pressure on federal and state agencies to reduce these diversions. These forces are resulting in a large-scale reallocation of water from agriculture to urban and environmental uses.
From page 143...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 143 However, surface water availability differs among alternative scenarios. Let ∆Sk n be the reduction of water supply available to region kn .
From page 144...
... 144 WATER CONSERVATION, REUSE, AND RECYCLING particular, water-holding capacity) and water quality (especially salinity)
From page 146...
... 146 WATER CONSERVATION, REUSE, AND RECYCLING Condition (44) states that the optimal acreage of crop i at district j is such that net marginal benefit of land is equal to its shadow price.
From page 147...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 147 income, it seems that gross revenues will decline as aggregate water levels decline. However, under some scenarios, the reduced water supply may lead producers to adopt modern irrigation technologies, which tend to increase per acre yields (Caswell and Zilberman, 1986)
From page 148...
... 148 WATER CONSERVATION, REUSE, AND RECYCLING users are liable for the reductions. Thus, the allocation of the cuts is treated as a choice variable, and a variety of initial allocation schemes is considered.
From page 149...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 149 necessary to permit examination of the distributional consequences impacts, and the fact that growers have a multidimensional response to policy changes. Rather than constructing a highly complex model incorporating all growing regions and all responses, the results of existing, smaller models can be compared to accurately measure policy impacts in a cost-effective way.
From page 150...
... 150 WATER CONSERVATION, REUSE, AND RECYCLING Fudenberg, D
From page 151...
... THE ECONOMICS OF AGRICULTURAL WATER USE AND THE ROLE OF PRICES 151 Moreno, G
From page 152...
... 152 WATER CONSERVATION, REUSE, AND RECYCLING Wichelns, D

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