Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information |
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| Authors: | Chokri Dridi Madhu Khanna |
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| Institution: | Chokri Dridi is a Ph.D. candidate in the Department of Agricultural and Consumer Economics and affiliated with the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign and Madhu Khanna is an associate professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. |
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| Abstract: | We develop a water allocation and irrigation technology adoption model under the prior appropriation doctrine with asymmetric information among heterogeneous farmers and between farmers and water authorities. We find that adverse selection reduces the adoption of modern irrigation technology. We also show that even with asymmetric information, incentives for water trade exist and lead to additional technology adoption with gains to all parties. This suggests that under asymmetric information, a thin secondary market improves the allocation of water resources and induces additional adoption of modern irrigation technologies. |
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| Keywords: | asymmetric information irrigation technology technology adoption water trading |
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