REGULATING IRRIGATION VIA BLOCK-RATE PRICING: AN ECONOMETRIC ANALYSIS
No hay miniatura disponible
Fecha
Título de la revista
ISSN de la revista
Título del volumen
Editor
Resumen
Descripción
In this paper, we adapt Burtless and Hausman's (1978) methodology in order to estimate farmer's demand for irrigation water under increasing block-rate tariffs and empirically assess its effect on aggregate demand and inter-farm allocation efficiency. This methodology overcomes the technical challenges raised by increasing block rate pricing and accounts for both observed and unobserved technological heterogeneity among farmers. Employing a micro panel data documenting irrigation levels and prices in 185 Israeli agricultural communities in the period 1992-1997 we estimate water demand elasticity at -0.3 in the short run (the effect of a price change on demand within a year of implementation) and -0.46 in the long run. We also find that, in accordance with common belief, switching from a single to a block price regime, yields a 7% reduction in average water use while maintaining the same average price. However, based on our simulations we estimate that the switch to block prices will result in a loss of approximately 1% of agricultural output due to inter-farm allocation inefficiencies.