Water Allocation, Crop Choice, and Priority Services

François Salanié and Vera Zaporozhets

No 21-1235, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We analyze the problem of allocating irrigation water among het- erogenous farmers when water supply is stochastic. If farmers are risk-neutral, a spot market for water is e¢ cient; while the oft-used uniform rationing system is ine¢ cient, both ex-ante and ex-post. In- deed, we show that it leads farmers to overexpose to risk, thus making shortages more severe and more frequent in case of drought. We pro- pose instead a regulation by priority classes extending Wilson (1989), and we derive an e¢ ciency result. We characterize the set of farmers that would win or loose 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.

JEL-codes: D47 Q15 Q25 (search for similar items in EconPapers)
Date: 2021-07-27
New Economics Papers: this item is included in nep-agr, nep-env and nep-isf
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Related works:
Journal Article: Water allocation, crop choice, and priority services (2022)
Working Paper: Water allocation, crop choice, and priority services (2022)
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