Exit fees and termination fees revisited: funding irrigation infrastructure in a manner compatible with water trade*

It has long been recognised that the mechanism for funding irrigation infrastructure in Australia may be incompatible with efficient trade in the rural water market. If the revenue received by an irrigation operator is dependent on the volume of water entitlements held in the operator’s region, out‐of‐region permanent water sales threaten the operator’s revenue stream, potentially leading to higher charges on remaining irrigators, encouraging an inefficient ‘rush for the exit’. In response, irrigation operators have imposed restrictions on permanent water trade, such as exit fees and termination fees, to protect their revenue stream. Previous economic analysis has suggested that exit fees, in particular, are a barrier to efficient trade in the water market and should be abolished. In contrast, this paper argues that allowing irrigators to cancel their water delivery rights without fees or charges leads to inefficient trade in the water market, hinders efficient on‐farm investment in sunk complementary assets and leads to inefficient network rationalisation decisions. Instead, the revenue stream of irrigation operators should be insulated from water trade decisions, through high termination fees, tying irrigation charges to the land, or tagging the obligation to pay delivery charges to the new owner of the traded water.     

Allocation trade in Australia: a qualitative understanding of irrigator motives and behaviour*

Governments in Australia are purchasing water entitlements to secure water for environmental benefit, but entitlements generate an allocation profile that does not correspond fully to environmental flow requirements. Therefore, how environmental managers will operate to deliver small and medium‐sized inundation environmental flows remains uncertain. To assist environmental managers with the supply of inundation flows at variable times, it has been suggested that allocation trade be incorporated into efforts aimed at securing water. This paper provides some qualitative and quantitative perspective on what influences southern Murray–Darling Basin irrigators to trade allocation water at specific times across and within seasons using a market transaction framework. The results suggest that while irrigators now have access to greater risk‐management options, environmental managers should consider the possible impact of institutional change before intervening in traditional market activity. The findings may help improve the design of intervention strategies to minimise possible market intervention impacts and strategic behaviour.     

Water rights: a comparison of the impacts of urban and irrigation reforms in Australia

Although there has been a policy thrust towards making all Australians more cognisant of the relative scarcity of water resources, the approach adopted for urban dwellers differs markedly from that applied to irrigators. These differences are examined from a property-rights perspective focussing primarily on the institutional hierarchies in the Victorian water sector. The analysis reveals significant attenuation of urban dwellers' rights, presumably on the basis of the information deficiencies that circumscribe urban water use. Alternative policy options are then proposed, which might alleviate some of these information deficiencies and simultaneously address the efficiency losses that attend the present arrangements.     

Using proportional modeling to evaluate irrigator preferences for market‐based water reallocation

Irrigators’ policy preferences for water reallocation programs usually take the form of proportional data, where one option will be relatively more or less favored than another in the composition of a government's total budget apportionment to address water reform. This study applies a zero‐one inflated beta regression to model Murray–Darling Basin irrigators’ preferences for market‐based water policy programs. Market‐based arrangements are more likely to provide efficient solutions to water reallocation problems, particularly where future uncertainty and appropriate pricing induce irrigator preferences for such programs. Our modeling of drivers of irrigator preferences for government expenditure on market‐based programs identified different determinants of zero (a corner solution) and proportional outcomes for the reallocation of Murray–Darling Basin water. In addition, the proportional modeling identifies some variables (namely, state regional influences, the type of farm production and recent debt, low income, or water allocation stressors) that increase engagement with market‐based programs. Interestingly, while price variables are important and statistically significant, they appear to be less relevant to program engagement than other influences.     

中国土地征用制度:反思与改革

研究目的:从理论上研究政府土地征用垄断的经济诱因,分析中国现行土地征用垄断制度安排下政府、农民、厂商利益受益或受损状况,进而探讨中国土地征用制度改革的路径选择.研究方法:局部均衡分析.研究结果:中国现行土地征用制度的典型特征是政府垄断.这一制度在保护政府利益的同时,也损害了农民和厂商的利益.研究结论:中国土地征用制度改革的路径选择是明确界定公共利益,规范政府土地征用行为;提高土地征用补偿标准,完善土地征用补偿机制;赋予农民国民待遇,完善社会保障体系;建立有效约束机制,避免政府暴利潜能;打破政府土地征用垄断坚冰,允许非农建设用地入市等.     

Elicitation of irrigators' risk preferences from observed behaviour

Water trading in the Murray–Darling Basin of Australia has developed to the point where it is a common adaptation tool used by irrigators, making it an apt case study to elicit the marginal value of irrigation water and irrigators' risk preferences in two key industries with differing levels of water dependence. Our data come from large‐scale and representative surveys of irrigated broadacre and horticultural farms in the Murray–Darling Basin over a 6‐year period. The marginal contribution of irrigation water to profit is estimated at $547 and $61/ML on average in horticulture and broadacre, respectively. Horticultural irrigators are found to be averse to the risk of large losses (downside risk) while broadacre irrigators are averse to the variability (variance) of profit.     

Who trades water allocations? Evidence of the characteristics of early adopters in the Goulburn–Murray Irrigation District,Australia 1998–1999**

This article applies a model of innovation to analyze the characteristics of irrigators within the Goulburn–Murray Irrigation District in Australia and examines the efficiency of the early water market in the late 1990s. Using multinominal and binary logit analyses we identify the factors associated with irrigators who sold or bought water allocations during 1998–1999 and irrigators who at that time had never participated in any kind of water trading. Contrary to expectations we find that early adopters of water trading were older farmers with low farm productivity, but that in line with theory they had higher levels of education, had spent less time farming, had larger irrigated area, farm operating surplus and farm assets, owned farms that were more intensively farmed, and were more progressive in their planning. There was only weak evidence to suggest that water moved from lower value uses to higher value uses, suggesting the water allocation market had limited efficiency in its’ initial years.     

An empirical assessment of the value of irrigation water: the case study of Murrumbidgee catchment*

Evaluation of value of irrigation water is essential for supporting policy decision making relating to investments in the irrigation sector, efficient allocation of irrigation water and water pricing and for crafting policies to compare the variable impacts of water reform within and across sectors of the economy. This paper asks the question of how much an established irrigator would pay for water and at what price farmers planning to expand the area they have under irrigation would consider paying for the right to access water. An analytical framework is developed to estimate the net present value of both annual and perennial agricultural activities in the Murrumbidgee catchment. Using these estimates the total value of water used in Murrumbidgee catchment is estimated. An aggregate water supply curve is derived for the catchment from where water may be acquired from irrigators for environmental flows.     

Adaptation responses to increasing drought frequency

Using state contingent analysis, we discuss how and why irrigators adapt to alternative water supply signals. Focusing on the timing of water allocations, we explore inherent differences in the demand for water by two key irrigation sectors: annual and perennial producers. The analysis explores the reliability of alternative water property right bundles and how reduced allocations across time influence alternative responses by producers. Our findings are then extended to explore how management strategies could adapt to two possible future drier state types: (i) where an average reduction in water supply is experienced; and (ii) where drought becomes more frequent. The combination of these findings is subsequently used to discuss the role water reform policy plays in dealing with current and future climate scenarios.     

Do Differences in the Scale of Irrigation Projects Generate Different Impacts on Poverty and Production?

This article investigates differences in household production and consumption among small‐ and large‐scale irrigators to assess whether the scale of an irrigation project increases household welfare in Mali. Much of the evidence of the impact of irrigation does not use counterfactual analysis to estimate such impact or distinguish between the scale of the irrigation projects to be evaluated. In the dataset collected by the author, both a large‐scale irrigation project and small‐scale projects are used to construct counterfactual groups. Propensity score matching is used to estimate the average treatment effect on the treated for small and large irrigators relative to non‐irrigators on agricultural production, agricultural income and consumption per capita. Small‐scale irrigation has a larger effect on agricultural production and agricultural income than large‐scale irrigation, but large‐scale irrigation has a larger effect on consumption per capita. This suggests that market integration and non‐farm externalities are important in realising gains in agricultural surplus from irrigation.     

The allocative efficiency and conservation potential of water laws encouraging investments in on-farm irrigation technology

Agricultural water conservation statutes are emerging in the West encouraging private irrigators to improve on‐farm irrigation efficiency as a basinwide conservation measure. We investigate whether private improvements promote the economic efficiency and conservation of water use basinwide under a wide variety of hydroeconomic circumstances. The standard of efficiency is how an irrigation district manager should optimally invest in improving the irrigation efficiencies of individual farms located along a stream while internalizing intrabasin allocative externalities of these investments. The results indicate that the popular Oregon legislative model may be the least effective in conserving water and promoting economically efficient water allocation.     

Missing markets for storage and the potential economic cost of expanding the spatial scope of water trade

A great deal of attention has been given in recent years to the question of externalities associated with water entitlements and how third parties can be protected without restricting opportunities for water trade. Yet one market failure that has received no attention at all is the missing market for storage that arises from the specification of water entitlements, particularly in Victoria where historically all storage decisions were made at the centralised level and where any additional carryover was treated as common property. The economic significance of the missing market for storage is demonstrated using an empirical model that represents the spatial‐temporal pattern of irrigation water demand in the Goulburn Valley and decisions regarding inter‐year storage of water in Lake Eildon. It is shown that, because irrigators have no incentive to trade‐off the benefit of current use (or sale) with the value of water storage, there is an erosion of reliability when opportunities for trade are broadened. The empirical results demonstrate that the loss in economic value associated with reduced reliability are as large as the gains from trade, so there is no net benefit from trade.     

Spot water markets and risk in water supply

Water availability patterns in semiarid regions are typically extremely variable. Even in basins with a highly developed infrastructure, users are subject to unreliable water supplies, incurring substantial economic losses during periods of scarcity. More flexible instruments, such as voluntary exchanges of water among users, can help users to reduce risk exposure. This article looks at the effects of spot water markets on the economic risk caused by water availability variations. Our theoretical and empirical risk analyses are based on the random profits of water users. Profit probability density functions are formally and graphically characterized for both water sellers and buyers under several possible market outcomes. We conclude from this analysis that, where water supply is stochastic, water markets unambiguously reduce both parties' risk exposure. The empirical study is conducted on an irrigation district in the Guadalquivir Valley (Southern Spain), where there is a high probability of periods of extreme water scarcity. Water demand functions for the district representative irrigators and a spatial equilibrium model are used to simulate market exchanges and equilibrium. This programming model is combined with statistical simulation techniques. We show that the profit probability distribution of a representative irrigator is modified if water exchanges are authorized, leading to risk reductions. Results also indicate that if the market were extended to several districts and users that are subject to varying hydrological risk exposure, extremely low‐profit events would be less likely to occur. In sum, we show that exchanging water in annual spot markets can reduce farmers' economic vulnerability caused by water supply variability across irrigation seasons. These results support the water policy reform carried out in Spain in 1999 to allow for voluntary water exchanges among right holders.     

期权价值对排水管网水价的影响研究

水业巨大的供需矛盾决定了城市水业的市场化方向,受制于污水处理的低产能利用率,排水管网建设成为水务发展的瓶颈。通过引入再投资管网建设工程的期权价值,构建了考虑期权价值的水价模型,得出的修正临界水价低于传统净现值模型得出的水价,形成的理论分析成果为排水管网建设工程的合理水价确定提供理论依据和支持。     

TRANSFERABLE WATER ENTITLEMENTS WHICH SATISFY HETEROGENEOUS RISK PREFERENCES

Irrigators in Victoria have a water entitlement which is composed of a highly secure water right and additional water which may be purchased if available. Water entitlements in NSW are based on the irrigated area with the actual volume of water received in any year depending almost entirely on seasonal conditions. Musgrave and Lesueur (1973) argued that these entitlements could be replaced by a portfolio of entitlements, with each type of entitlement in the portfolio guaranteeing a nominated minimum value of water at a different probability. Thus, irrigators could purchase a portfolio of water entitlements which would suit their individual risk preferences. The purpose in this paper is to show how a water authority can construct a portfolio of water entitlements which satisfies these requirements and also to demonstrate that the entitlements in the portfolio satisfy a first degree stochastic dominance relationship. A worked example is presented in which these results are illustrated.     

兰州市农村基础设施建设对农业经济影响的研究

以兰州市三县五区为研究区,通过对兰州市农村基础设施建设和农业经济发展现状进行分析,采用固定效应模型,选取2007年-2017年兰州市农村基础设施的面板数据,对农村基础设施建设对农业经济的影响进行计量分析,结果表明:交通运输、农田水利和卫生环境基础设施对农业经济增长有显著的促进作用。提出了要继续推进兰州市农村交通运输基础设施和水利基础设施建设,加大资金投入,完善农村卫生环境基础设施建设,同时注重农村基础设施投资与农业经济增长的相关性,满足农业生产的效用性和长远性的建议。     

The impact of drought and water scarcity on irrigator farm exit intentions in the Murray–Darling Basin

Drought and future water scarcity in the Murray–Darling Basin (MDB) will continue to restructure the irrigation industry in the coming decades. There has been little work conducted in Australia that has modelled farm exit or exit intention. ABARES farm survey data were used to model irrigators’ farm exit intentions across the southern MDB from 2006 to 2013. In particular, we examined the hypotheses that drought and water scarcity positively impacted on farm exit intentions and that it is the poorest performing farms that intend to exit in times of drought. Results revealed that water scarcity impacts varied considerably. There was only weak evidence to suggest that irrigators’ exit intentions were higher in times of drought, but there was stronger evidence to support the influence of a lagged water scarcity impact on farm exit intentions during periods of nondrought (e.g. intending to exit at times when the property market was less depressed). There was also strong evidence that poorer performing farms (measured by rates of return and higher debt over a certain level) were more likely to have exit intentions in drought periods, but not necessarily so in nondrought periods. Older age is the most consistent predictor of farm exit intentions across all industries, though it was most significant in drought periods.     

农户参与市场化生态补偿意愿及影响因素分析

[目的]与参与政府主导的生态补偿项目不同,农户参与市场化生态补偿有更大的自主性,因此在"建立市场化、多元化生态补偿"背景下,加强农户参与市场化生态补偿意愿的研究具有重要意义。探究农户参与市场化生态补偿的意愿,并识别出影响因素,寻求提高农户市场化生态补偿参与意愿的发力点。[方法]文章基于贵州省仁怀市208户农户问卷调查数据,运用二元Logistic回归从农户个体特征、家庭特征、农业经营特征和农户行为态度四个方面研究农户参与市场化生态补偿意愿及其影响因素。[结果]农户参与市场化生态补偿意愿整体较高,81.25%的农户表示愿意参与市场化生态补偿。家庭务农人数越多、家中有村干部、平地数量越多、坡地数量越少、对坡耕地经济收益越不满意、认为水质下降对作物产量影响越严重、越认同参与生态补偿可获得荣誉感的农户,越愿意参与市场化生态补偿。[结论]增强农户参与市场化生态补偿意愿要从以下三个方面发力:保障和提高农户参与市场化生态补偿后的经济收益;降低农户对土地的依赖程度;增强农户参与市场化生态补偿的荣誉感和参与感。     

Market-based grazing land transfers and customary institutions in the management of rangelands: Two case studies on the Qinghai-Tibetan Plateau

Beginning in the early 1990’s, grazing lands once held in common were contracted to individual households in the rangeland regions of China. The resulting fragmentation of rangelands has led to ecological and social problems. As China seeks to address intractable poverty and rangeland degradation, attention has turned to rental, or transfer, of contracted grazing land as a market-based approach to re-aggregating grazing land into larger units that support economies of scale. However, given that many pastoral regions still maintain community customary institutions, what the relationship between market mechanisms and local customary institutions should be in rangeland management needs further analysis. This paper applies comparative case studies of two types of relationships between market mechanisms and customary institutions: (1) market mechanisms that replace customary institutions in the case of Axi village, and (2) market mechanisms that are embedded within customary institutions in Xiareer village. This allows contrast of the impacts of differing approaches on livelihoods, livestock production, and wealth differentiation among pastoral households. We found that there is a higher level of livestock mortality, lower livestock productivity, and higher livestock production cost in Axi Village compared to Xiareer Village. In addition, household asset levels are higher and there is less income differentiation in Xiareer Village. It is concluded that embedding market mechanisms within customary institutions has had notable benefits for the herders of Xiareer Village, because it is a better fit to the coupled pastoral social-ecological system. Based on these findings, we argue that in pastoral communities where the rangeland transfer system for contracted grazing land has not yet been implemented, it is critical to reconsider China’s current policy approach to pay greater attention to the innovative management systems being developed in local regions. Instead of considering market-based approaches as oppositional to traditional institutions, options that derive from the interaction of market-based and customary institutions should be considered.     

Valuing options for reserve water in the Fitzroy Basin*

Option values may be an important component of non‐use values when development options for environmental assets are considered. These are values that the community might hold for maintaining options to make future choices about allocating resources. However, option values are very difficult to define, at both theoretical and practical levels, and there has been a retreat over the past decade to the more inclusive concept of option prices. In the present paper, estimates of option values are reported for retaining unallocated water in reserve rather than using it for current development. The use of option values rather than option prices is justified on the basis that the focus is on non‐use values, and demand and supply uncertainties have been minimised. These values have been assessed through a series of nine choice modelling surveys that have been conducted over a 3‐year period in the Fitzroy River Basin in central Queensland. The results are then extrapolated to the case study areas within the basin to assess whether unallocated water should be held in reserve or used for development.