Analysis of water market effects on farm profits, nitrate pollution and temporary agricultural labour.

Javier Calatrava Leyva, Alberto Garrido Colmenero

Abstract

The evidence available about the external effects of functioning water markets is ambiguous. While some authors have shown that water exchanges diminishes the polluting effects of irrigated agriculture, others conclude otherwise. The joint use of contaminant input taxes and the establishment of water markets gives rise to ambiguous results, because water and fertilisers are not substitutes. The objective of this paper is to examine the joint effects of establishing an hypothetical spot water market among farmers and a nitrogen tax on irrigators’ benefits, nitrogen pollution and hired external labour. Two non-linear models are formulated and developed that simulate irrigators’ behaviour and the functioning of inter-district water markets in the Guadalquivir basin. Results show that water markets would increase hired farm labour and irrigators’ surplus, though at the cost of increasing nitrates pollution. The reduction of nitrates contamination achieved by the tax is attenuated as a result of water exchanges, which in turn contribute to reduce the negative income effects caused by the nitrates tax. Water markets increase unambiguously the social benefits resulting from increasing hired labour.

Keywords

Mercados de agua; efectos externos; contaminación por nitratos

Subject classification

Q25, Q13.

Full Text:

PDF

References

Archibald, S.O. y Renwick, M.E. (1998). Expected transaction costs and incentives for water market development. En Easter, K.W., Rosegrant, M. y Dinar, A. (eds), Markets for Water - Potential and Performance. Kluwer Academic Publishers, New York, 95-118. https://doi.org/10.1007/978-0-585-32088-5_7

Arriaza, M. y Gómez-Limón, J.A. (2000). Mercados locales de agua de riego. Una modelización multicriterio en el Bajo Guadalquivir. Revista de Estudios Agrosociales y Pesqueros 188: 135-164.

Bjornlund, H. y McKay, J. (1998). Factors affecting water prices in a rural water market: A south Australian experience. Water Resources Research 34(6): 1563-1570. https://doi.org/10.1029/97WR03470

Bjornlund, H. y McKay, J. (2001): Operational mechanisms for the efficient working of water markets - Some australian experiences. Presentación al 7th International Water and Resource Economics Consortium and the 4th Seminar on Environmental and Resource Economics, Girona, 3-5 Junio.

Calatrava, J. y Garrido, A. (2001). “Agricultural subsidies, water pricing and farmers’ response: Implications for water policy and CAP reform”. En Dosi, C. (ed), Agricultural use of Groundwater – Towards integration between agricultural policy and water resources management. Kluwer Academic Publishers, Dordrecht, 241-257. https://doi.org/10.1007/978-94-015-9781-4_11

Carter, H.O., Vaux Jr., H.R. y Scheuring, A.F. (eds) (1994). Sharing scarcity. Gainers and losers in water marketing. University of California Agricultural Issues Center, Davis.

Department of the Interior (1998). Final Report – Water in the West: The challenge for the next century. Denver. http://www.den.doi.gov/wwprac/reports/final.htm

Dinar, A. y Letey, J. (1991). Agricultural water marketing, allocative efficiency and drainage reduction. Journal of Environmental Economics and Management 20: 210-223. https://doi.org/10.1016/0095-0696(91)90009-8

Easter, K.W., Rosegrant, M.W. y Dinar, A. (eds.) (1998). Markets for water - Potential and performance. Kluwer Academic Publishers, New York. https://doi.org/10.1007/b102479

Garrido, A. (1998a). An economic analysis of water markets within the Spanish agricultural sector: Can they provide substantial benefits? En Easter, K.W., Rosegrant, M.W. y Dinar, A. (eds.), Markets for water - Potential and performance. Kluwer Academic Publishers, New York, 223-239. https://doi.org/10.1007/978-0-585-32088-5_14

Garrido, A. (1998b). Agricultural water pricing practices in OECD countries. Group on Economic and Environmental Policy Integration, ENV/EPOC/GEEI(98)11. OCDE, Paris.

Garrido, A. (2000). A mathematical programming model applied to the study of Spanish water markets. Annals of Operations Research 94: 105-123. https://doi.org/10.1023/A:1018965016134

Graham, W. (1998). A hundred rivers run through it. California floats its future on a market for water. Harper’s Magazine. June.

Hanley, N. (1990). The economics of nitrate pollution. European Review of agricultural Economics 17(2): 129-151. https://doi.org/10.1093/erae/17.2.129

Hearne, R.R. y Easter, K.W. (1998). Economic and financial returns from Chile water markets. En Easter, K.W., Rosegrant, M.W. and Dinar, A. (eds.), Markets for water - Potential and performance. Kluwer Academic Publishers, New York, 223-239.

Howe, C.W., Lazo, J.K. y Weber, K.R. (1990). The economic impacts of agriculture-tourban water transfers on the area of origin: A case study of the Arkansas River Valley in Colorado. American Journal of Agricultural Economics 72: 1200-1204. https://doi.org/10.2307/1242532

Howitt, R.E. (1994). Effects of water marketing on the farm economy. In Carter, H.O., Vaux Jr., H.R. y Scheuring, A.F. (eds), Sharing scarcity. Gainers and losers in water marketing. University of California Agricultural Issues Center, Davis, 97-133.

Howitt, R.E. (1995). Positive Mathematical Programming. American Journal of Agricultural Economics 77(2): 329-342. https://doi.org/10.2307/1243543

Murphy, J.M., Dinar, A., Howitt, R.E., Rassenti, S.J. y Smith, V.L. (2000). The design of "smart" water market institutions using laboratory experiments. Environmental and Resource Economics 17: 375-394.

OECD (1999). The price of water. Trends in OECD countries. OECD, Paris. 173 pp. https://doi.org/10.1787/9789264173996-en

Paris, Q. (1992). The von Liebig hypothesis. American Journal of Agricultural Economics 74: 1019-1028. https://doi.org/10.2307/1243200

Pigram, J.J., Delforce, R.J., Coelli, M.C., Norris, V., Antony, G., Anderson, R.L. y Musgrave, W.F. (1992). Transferable water entitlements. The Center for Water Policy Research, University of New England, Armidale Rosegrant, M.W., Ringler, C., Mckinney, D.C., Cai, X., Kellerr, A. y Donoso, G. (2000). Integrated economic-hydrologic water modelling at the basin scale: The Maipo river basin. Agricultural Economics 24: 33-46. https://doi.org/10.1111/j.1574-0862.2000.tb00091.x

Weber, M.L. (2001). Markets for water rights under environmental constraints. Journal of Environmental Economics and Management 42: 53-64. https://doi.org/10.1006/jeem.2000.1149

Weinberg, M. y Wilen, J.E. (1997). Taking a closer look at “inefficient” policies: options for controlling agricultural pollution in California’s San Joaquin river basin. 8th Annual Conference of the European Association of Environmental and Resource Economists, Tilburg, The Netherlands, 26-28 Junio.

Weinberg, M., Kling, C.L. y Wilen, J.E. (1993). Water markets and water quality. American Journal of Agricultural Economics 75: 278-291. https://doi.org/10.2307/1242912

Young, R.A. (1996). Measuring economic benefits for water investments and policies. World Bank Technical Paper nº338. Washington D.C. 118 pp. https://doi.org/10.1596/0-8213-3745-9

Abstract Views

387
Metrics Loading ...

Metrics powered by PLOS ALM

Refbacks

  • There are currently no refbacks.




 Universitat Politècnica de València

e-ISSN: 2174-7350   ISSN: 1578-0732   https://doi.org/10.4995/earn