Assessing the Direct Economic Effects of Reallocating Irrigation Water to Alternative Uses : Concepts and an Application
Irrigation water reallocations are playing an increasingly important role in both developed and developing countries. With growing urban and environmental water demands, rising costs for the development of new water supplies, and irrigated agricult...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110914142718 http://hdl.handle.net/10986/3561 |
| Summary: | Irrigation water reallocations are
playing an increasingly important role in both developed and
developing countries. With growing urban and environmental
water demands, rising costs for the development of new water
supplies, and irrigated agriculture usually including the
least economically valuable use of water, transfers of
irrigation water to alternative uses are increasing.
However, such reallocations are often controversial, and it
is often questioned whether the benefits resulting from
these transactions are large enough to outweigh the
associated costs. This paper reviews the experience with
irrigation water transfers, including the involvement of the
World Bank. It discusses the problems of assessing the
direct economic effects of reallocations, with a focus on
the foregone direct benefits in irrigated agriculture.
Because foregone direct benefits cannot easily be directly
observed, they need to be estimated. However, assessments
have shown widely differing estimates -- even when the same
methodology was used. The paper reviews the methodologies
and model specifications used for estimating foregone direct
benefits; illustrates the impact of different model
specifications on the magnitude of estimates of foregone
direct benefits based on an application in an example case;
and draws conclusions with regard to future efforts in
assessing reallocation effects, including calculating
adequate compensation for farmers. Because estimating the
direct benefits of irrigation expansion is methodologically
equivalent to estimating foregone direct benefits from
reduced irrigation water supplies, the findings have
implications for a broader range of water allocation decisions. |
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