Theodore M. Horbulyk

Welfare Gains From Potential Water Markets in Alberta, Canada

There are few jurisdictions where the topic of potential gains from water markets is as timely and central as in the province of Alberta, Canada. Following five years of public review and discussion, the Legislative Assembly of Alberta passed legislation in August, 1996, that will allow market transfers of the right to use surface and groundwater among competing users and uses (xcAlberta, 1996).1 The new approach represents a major shift away from a legislative framework and a water management approach that had remained essentially unchanged for the previous hundred years. Historically, water rights have not been tradable among sites or uses, and there has not been an efficient rationing system to deal with water shortages. Whether or not this major change in water policy will be viewed as a success in the longer term is an open question. It is essentially a question about whether water markets will be able to generate significant welfare gains relative to the status quo, and relative to other policy options.

Market mechanisms and the efficient allocation of surface water resources in southern Alberta

Abstract Population growth and economic expansion increasingly are stressing water resources in southern Alberta, Canada. Adopting market mechanisms may improve water use efficiency. Utilizing a novel network model of an entire river basin, we quantify the short-run efficiency gains (over one growing season) from reallocating surface water. Employing a standard welfare maximizing objective, and observing essential institutional and hydrologic structures, we find the relative efficiency gains from introducing market pricing to be under 3% for a year of surplus water flows, about 6% for a mean flow year, and more than 15% for a drought flow year. Although such gains exclude the costs of the current water allocation policy, as well as those of moving to market pricing, results tend to support the present cautious approach by the Alberta government to modify the mechanisms for allocating surface water.

Markets, Policy and the Allocation of Water Resources Among Sectors: Constraints and Opportunities

The paper examines the potential for economic instruments to improve the allocation of water resources across sectors in the economy and identifies the policy issues and policy research that will be prerequisites to achieving this potential. The topic is defined broadly enough to consider current practices and innovative proposals for definition of property rights — that is, for the types of entitlements and activities to which these economic instruments may relate. Consideration is given to issues of jurisdiction within and across levels of government, especially where effective deployment of specific economic instruments might introduce new elements of public revenue and expenditure along with new requirements to exercise regulatory authority and enforcement efforts.

Optimal Water Allocation under Short-Run Water Scarcity in the South Saskatchewan River Basin

This paper examines the effect on economic welfare of alternative surface water allocations in the Alberta portion of the South Saskatchewan River Basin in Canada. Growing demands for urban and instream water uses add to significant irrigation withdrawals, all contributing to relative water scarcity. A computational model optimizes the annual value derived from spatially diverse water withdrawals, fully respecting their hydrologic and economic linkages. The model simulates current allocation practices and defines optimal allocations under alternative demand and supply scenarios. The use of the publicly developed Aquarius modeling software illustrates its comparative strengths relative to other models that optimize explicitly with respect to economic values. The model’s numerical estimates support the conclusion that there are sufficient surface water resources for users to adapt to a range of alterations in water supply or water demand, but that substantial short-term reallocations of water among users mi...

Intellectual property rights and technological innovation in agriculture

This paper addresses the potential role and importance of an appropriate system of intellectual property rights in sustaining innovation and technological change in agriculture, a sector where the research and development process is typically cumulative in nature. The design and use of intellectual property rights as an economic incentive is illustrated by reference to Canada`s new system of Plant Breeder`s Rights, and by reference to recent economic research analyzing alternative designs for such a system. 21 refs., 1 fig.

The social cost of labor in rural development: job creation benefits re-examined

Job creation effects are examined as they would apply to social analysis of rural development programming by public or private sector agencies. A synthesis and critique are provided of approaches to valuing the social opportunity cost of labor. These approaches vary according to whether or not unemployment is present in the pre-project state and according to whether or not there is interregional migration in response to project hiring. Graphical, partial equilibrium analysis illustrates why, in general, job creation and project employment give rise to social costs, not benefits. The magnitude of these social costs is shown to depend upon the presence of payroll taxes, wage subsidies and unemployment, in addition to the market’s supply and demand elasticities. These social costs may be reduced or offset in specific instances where projects increase the value of labor’s productivity or reduce its costs, such as with job training, worker mobility and skill development projects. Careful attention to these approaches can help society choose correctly among alternative development proposals and among alternative (labor-intensive versus capital-intensive) technologies.

Functional forms and multivariate risk independence

Abstract This paper derives a test for multivariate risk independence that employs the normalized, quadratic restricted profit function [Diewert and Ostensoe (1988)]. This flexible functional form is better suited to this purpose than the modified translog originally proposed by Epstein (1980).