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Impact of irrigation water pricing in the Bajo Guadalquivir

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Authors: N.M. Montilla-López, C. Gutiérrez-Martín, J.A. Gómez-Limón
Issue: 113-1 (90-111)
Topic: Agricultural Economics
Keywords: Irrigation, economic tool, water demand, mathematical programming, socio-economic impact

This paper focuses on the analysis of the effect of water pricing on water demand in intensive irrigation systems, as well as both economic and social impacts that would have applied after the reform of the recently approved Common Agricultural Policy. The irrigation area considered as a case study has been the water user association of Sector BXII of Bajo Guadalquivir. The unit of analysis was the farm, distinguishing there different type of characteristic farms of the study area. Three simulation models have been built for each of these farm types, based on three different mathematical programming methods. With these methods, it was possible to simulate the farmers? decision making in a more robust manner. These simulations have allowed to quantify the expected impact of this instrument on water consumption, farm income, government revenue, employment generation and social welfare associated with agricultural water use. The results obtained from the different methods have been very similar. The analysis of the demand curves shows an inelastic segment up to high water prices (€ 0.3/m³), followed by an elastic segment where farmers would carry out significant changes to their cropping patterns. Regarding the analysis of socioeconomic impacts of water pricing, the results show a significant loss in agricultural incomes in both segments. However, it is worth mentioning that only in the elastic segment these losses are higher than gains in public revenues, thus generating losses in economic efficiency and generated employment.

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