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Economy-wide gains from decentralized water allocation in a spatially heterogenous agricultural economy

Xinshen Diao (), Terry Roe and Rachid Doukkali

Environment and Development Economics, 2005, vol. 10, issue 3, 249-269

Abstract: This paper analyzes the economy-wide gains obtainable from the allocation of surface irrigation water to its most productive use, and evaluates a decentralized mechanism for achieving this result in a spatially heterogeneous environment. The focus country for the analysis is Morocco. The analysis is based on a general equilibrium model that, in addition to the rest of the economy, captures 82 agricultural production activities, 66 of which are in seven separately identified water districts that span the entire country. The results suggest that a decentralized water trading mechanism could increase agricultural output by 8.3 per cent, affect the rental rates of other agricultural inputs at the national level, including labour, and have economy-wide effects that entail a decline in the cost of living, an increase in aggregate consumption, and expansion of international trade.

Date: 2005
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