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

Mette Kildegaard Graversen ()
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Mette Kildegaard Graversen: Institute of Food and Resource Economics, University of Copenhagen

No 2011/2, IFRO Working Paper from University of Copenhagen, Department of Food and Resource Economics

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.

Keywords: Water extraction; River system; Tax mechanism; Upstream-downstream users (search for similar items in EconPapers)
Pages: 15 pages
Date: 2011-01
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