Keith C. Knapp

Benefits from Groundwater Management: Magnitude, Sensitivity, and Distribution

Empirical estimates of benefits from groundwater management are reported for an area in California with heavy reliance on groundwater supplies. Benefits are quite sensitive to the water demand schedule and interest rate but less sensitive to other parameters. However, in all cases considered the increases in welfare from groundwater management are less than ten percent. Tax revenues received under a system of pump taxes are four to five times as large as the benefits from management. Thus, groundwater users gain under a system of quotas but may suffer substantial welfare losses under pump taxes.

Water transfers, agriculture, and groundwater management: a dynamic economic analysis

Water transfers from agricultural to urban and environmental uses will likely become increasingly common worldwide. Many agricultural areas rely heavily on underlying groundwater aquifers. Out-of-basin surface water transfers will increase aquifer withdrawals while reducing recharge, thereby altering the evolution of the agricultural production/groundwater aquifer system over time. An empirical analysis is conducted for a representative region in California. Transfers via involuntary surface water cutbacks tilt the extraction schedule and lower water table levels and net benefits over time. The effects are large for the water table but more modest for the other variables. Break-even prices are calculated for voluntary quantity contract transfers at the district level. These prices differ considerably from what might be calculated under a static analysis which ignores water table dynamics. Canal-lining implies that districts may gain in the short-run but lose over time if all the reduction in conveyance losses is transferred outside the district. Water markets imply an evolving quantity of exported flows over time and a reduction in basin net benefits under common property usage. Most aquifers underlying major agricultural regions are currently unregulated. Out-of-basin surface water transfers increase stress on the aquifer and management benefits can increase substantially in percentage terms but overall continue to remain small. Conversely, we find that economically efficient management can mitigate some of the adverse consequences of transfers, but not in many circumstances or by much. Management significantly reduced the water table impacts of cutbacks but not annual net benefit impacts. Neither the break-even prices nor the canal-lining impacts were altered by much. The most significant difference is that regional water users gain from water markets under efficient management.

Estimation of von Liebig Response Functions

Two distinct but related approaches for the estimation of von Liebig response functions are presented. The first approach is based upon a two-phase, ordinary least squares procedure combined with bootstrapping for computing the standard errors of the estimates. The second approach generates maximum likelihood estimates of the parameters and can be implemented according to two different parameterizations of the model. Application of the procedures to a sample of experimental data suggests a satisfactory degree of conformity of the results. A test of normality of the disturbance term based upon the estimated residuals failed to reject the null hypothesis, further supporting the maximum likelihood approach.

Drainwater Management for Salinity Mitigation in Irrigated Agriculture

Salinity and drainage management options include source control, reuse, and evaporation ponds. This article identifies efficient strategies to maintain hydrologic balance in closed drainage basins and evaluates their impact on regional agricultural profits. Theoretical analysis suggests that economic efficiency requires acknowledgment of the nonseparability between water use and land value. Empirically, our solution involves a modest amount of source control, a substantial amount of reuse, and the elimination of evaporation ponds often associated with large environmental damages, while maintaining grower income. Various policy instruments and options are introduced and discussed, including a system of drainwater charges, marketable permits, and land retirement.

Dynamics of Agricultural Technology Adoption: Age Structure, Reversibility, and Uncertainty

We develop a dynamic model of technology adoption that generalizes previous literature by incorporating technology age, reversible investment, variable inputs and outputs, and stochastic prices. The model is calibrated for irrigated cotton production in California. Optimal investment exhibits a significant vintage capital effect which provides a new candidate explanation for delayed technology diffusion. We show that the hurdle rate derived by option value models can be partially explained by the assumption of irreversible investment, and simulations demonstrate this assumption has regional policy relevance. Uncertainty affects optimal investment but has a declining effect with technology age.

Dynamic Resource Management: Intertemporal Substitution and Risk Aversion

We consider resource management with recursive preferences. These generalize expected utility while eliminating some well-known difficulties. Monotonicity and convergence properties of optimal decision rules are established using lattice programming methods. Empirical applications are rangeland and groundwater management. Decreasing the intertemporal elasticity of substitution implies greater (lower) resource usage with limited (abundant) stocks. This moderates stock evolution and stabilizes consumption. Increasing risk aversion implies the same or reduced usage over the state space. Intertemporal substitution has a substantial effect on the optimal decision rule and a moderate effect on the limiting distribution, while risk aversion has a very small effect. Copyright 1996, Oxford University Press.

Spatial Dynamics of Water and Nitrogen Management in Irrigated Agriculture

The material contained herein is supplementary to the Article named in the title and published in the American Journal of Agricultural Economics, forthcoming.

Economic evaluation of salinity, drainage and non-uniformity of infiltrated irrigation water

Abstract Salinity, drainage and non-uniformity of irrigation water are important components in determining optimal water application and related profitability. A crop-water production function assuming steady state conditions is incorporated in a long-run economic model to investigate the combined effects of salinity, irrigation uniformity and different drainage requirements at the field scale for the specific crop. The analysis was conducted for corn and cotton as sensitive and tolerant crops to salinity, respectively. Optimum applied water and associated profits, yield and drainage volumes were computed for each crop. The computations were done for the condition that no drainage system was required and also where a drainage system was required and the drainage water was disposed of to either a free off-farm facility or to an on-farm evaporation pond constructed on productive or non-productive land. The main findings are that type of drainage disposal system affects the optimal values of applied water, profits, yield and drainage volumes, except for uniform water applications and non-saline irrigation water. Another finding is that in the long run, under saline conditions and/or different drainage disposal systems, a sensitive crop such as corn is not profitable and goes out of production. In general the profit levels associated with the various drainage options are in the order of no drainage requirement ⩾ free off-farm facility > on-farm evaporation pond on non-productive land > on-farm evaporation pond on productive land. Uniformity of irrigation water affects values of the analyzed variables and the effects are greatest for the cases of on-farm evaporation ponds. Pumping cost effects are quite small, but water price effects are more significant. Breeding the crops for increased salinity tolerance has little effect when irrigating with water of low salinity and/or low irrigation uniformity.

Irrigation water pricing policies to reduce and finance subsurface drainage disposal

Abstract Disposal of water collected in agricultural subsurface drainage systems has normally been done without direct charge to the farmer. In some cases, drainage water disposal costs are becoming very high so that the institution of incentives for the farmer to reduce drainage volumes and pay for their safe disposal are appropriate. The consequences of various irrigation water pricing policies on optimal irrigation application, profits and drainage volumes were analyzed for cotton grown under three levels of irrigation uniformity. The unregulated case led to applied water and drainage flows that exceeded the economically efficient levels. A direct charge on drainage waters equal to their disposal costs induced economically efficient water application but required a drainage water volume monitoring system. A flat fee on irrigation water could be set to induce an economically efficient water application; but in this case, the revenues generated by the imposition of the extra charge greatly exceeded the costs of disposal. Selection of the flat fee to equalize revenues and treatment costs resulted in excessive irrigation compared to the economically efficient levels. Tiered water pricing, whereby the unit water price is increased as volume increases, is another option. When the seasonal crop evapotranspiration was selected as the level to impose the tiered pricing, the tiered price could be selected to induce economically efficient applications. However, the revenues generated by the tiered price were less than the costs for disposal. Water pricing policies suffer from being sensitive to irrigation uniformity. Investment in irrigation technology to improve irrigation uniformity is justified, and the level of investment increases as the costs for drainage water disposal increase.

Irrigation management and investment under saline, limited drainage conditions: 1. Model formulation

A dynamic optimization model for irrigation management and investment of an individual field is formulated. The model is applicable to situations where soil salinity is a current or potential problem and where drainage flows incur costs. The crop rotation is prespecified and several alternate irrigation systems are available for investment. These differ in application uniformity and cost. The field is assumed to be spatially variable in soil salinity and infiltrated water. The joint distribution of these two variables evolves over time in response to annual volumes of irrigation water and type of irrigation system. Social net benefits are defined as crop revenue net of irrigation costs, production costs, and environmental/disposal costs associated with percolation of water below the root zone. The optimization problem is to choose annual applied water volumes and investment in irrigation systems to maximize the present value of social net benefits.