Will Farmers Save Water? A Theoretical Analysis of Groundwater Conservation Policies for Ogallala Aquifer

Tong Wang, Seong Park and Hailong Jin

No 229904, 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas from Southern Agricultural Economics Association

Abstract: A variety of water conservation policy alternatives have been promoted to extend the economic life of Ogallala Aquifer in the Southern Great Plains. However, few studies have been done to analyze whether these policies provide profit-driven farmers with incentives to save water. In this paper we adopt a theoretical approach to analyze farmer’s optimal response when facing following policy alternatives, including 1) irrigation technology subsidy, 2) increased water cost, 3) unit subsidies for water saving; and 4) subsidies on water-conservative crop. Our findings suggest that optimal water conservation policies vary by region. Specifically, the switching to higher efficiency technology should occur in a preventative stage for the water saving to occur. Similarly, an increase in water cost promotes water saving only when water resource is relatively abundant. In regions where groundwater already poses a constraint, the unit subsidy for actual water saved and price subsidy for water-conservative crops are more effective in achieving the water conservation goal.

Keywords: Environmental Economics and Policy; Farm Management; Production Economics; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 46
Date: 2016
New Economics Papers: this item is included in nep-agr and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:saea16:229904

DOI: 10.22004/ag.econ.229904

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