Water allocation, crop choice, and priority services

François Salanié and Vera Zaporozhets ()
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Vera Zaporozhets: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We analyze the problem of allocating irrigation water among heterogeneous farmers when water supply is stochastic. If farmers are risk-neutral, a spot market for water is efficient; while the oft-used uniform rationing system is inefficient, both ex ante and ex post. Indeed, we show that it leads farmers to overexpose to risk, thus making shortages more severe and more frequent in case of drought. We propose instead a regulation by priority classes extending Wilson, and we derive an efficiency result. We characterize the set of farmers that would win or lose from such a reform. We also argue that a system of priority classes may be preferred to a spot market system, because scarcity is easier to manage ex ante than ex post, and because this system facilitates the supply of insurance to risk-averse agents.

Keywords: Water; Irrigation; Priority Classes; Rationing (search for similar items in EconPapers)
Date: 2022
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Published in Journal of Public Economic Theory, 2022, 24 (1), pp.140-158. ⟨10.1111/jpet.12538⟩

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Journal Article: Water allocation, crop choice, and priority services (2022)
Working Paper: Water Allocation, Crop Choice, and Priority Services (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03641831

DOI: 10.1111/jpet.12538

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