Search

Increasing economic pressures on water resources are causing countries to (re)consider various mechanisms to improve water use efficiency. This is especially for irrigation agriculture, a major consumer of water. "Getting prices right" is seen as one way to allocate water, but how to accomplish this remains a debatable issue. Methods of allocating water are sensitive to physical, social, institutional and political settings, making it necessary to design allocation mechanisms accordingly. This paper surveys current and past views on allocating irrigation water with a focus on efficiency, equity, water institutions, and the political economy of water allocation.

General equilibrium and open economy trade theory are used along with time series data on the U.S. agricultural sector to provide insights into the structure of agricultural supply, factor returns and linkages to the rest of the economy. Output expansion and factor returns are found to vary depending on relative factor intensities, which we refer to as Rybczynski and Stolper‐Samuelson like effects. The effect of the rest of the economy, particularly the increase in price of services, is found to have relatively large negative impacts on agriculture. The short‐run effects of prices and factor endowments on growth in agricultural supply and factor returns are dominated by the long‐run effects of technological change.

There is increasing concern that the intensification of cereal production in northern Nigeria is threatening the sustainability of the agricultural environment. This article describes the effects of trade restrictions on grain imports and of fertilizer subsidy on households' decisions, and draws implications for degradation of the agricultural environment. It develops social accounting matrices (SAMs) for two household types as the basis for capturing the structure of resource allocation, cropping choices, and input use, and then uses the SAM to simulate household responses to changes in relative grain prices and fertilizer prices. Both simulations, but particularly the fertilizer price change, favour the shift from cereals to legumes. A third simulation reflecting technical change in legumes results in the largest shifts from cereals to legumes. It is concluded that appropriate policy reforms complemented by technical change will increase diversification of the cropping system and reduce inefficient fertilizer use. The cumulative effects of these changes will improve soil nitrogen and organic matter and help break the pest and disease complex, thereby improving the agricultural environment.

This study investigates the effect of electricity subsidies on economic and groundwater dynamics. The analysis follows from a dynamic, multisector and general equilibrium model in which both aquifer hydrology dynamics in the Punjab region of India and capital accumulation across India are endogenous. The model predicts Punjabi aquifer depletion which has distinct regional impacts and slight spillovers on the rest of the Indian economy. From the Punjab perspective, electricity subsidies encourage higher levels of groundwater extraction than one would observe in the absence of the subsidy. In turn, the higher levels of groundwater extraction increase agriculture's ability to compete for labor and other farm inputs. Even with the subsidy, however, as the economy transitions to the long run equilibrium, groundwater tables fall and more electricity is needed to supply the same amount of water used in the previous period. These forces slowly diminish agriculture's ability to compete for resources and the sector eventually loses resources to the rest of the economy and in turn, agricultural income falls over time. These dynamics are accentuated when the subsidy is removed, leading to a more rapid decline in Punjabi agricultural income.Our empirical findings suggest eliminating the 'electricity for irrigation' subsidy leads to double gains: An environmental gain and an economic gain. The environmental gain is a slower rate of aquifer depletion over time relative to a subsidy world. Removing the subsidy discourages production of high water-intensive crops, thus slowing the rate of groundwater extraction. Although removing the subsidy increases agricultural production costs, it makes electricity less expensive for competing sectors, namely manufacturing, which in turn leads, over time, to increased electricity, capital and labor demand from manufacturing. This reallocation of resources to more productive sectors in the economy leads to an increase in Punjabi gross state domestic product, as compared to the case where electricity is subsidized. The empirical results suggest removing Punjabi electricity subsidies entails trade-offs between agricultural and manufacturing income and has implications for long term water use. Empirical results also suggest that correctly calculating the "stock" value of a natural resource requires macroeconomic data and hence, may be impossible to conduct in a partial equilibrium setting.