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Edited by Jeroen C.J.M. van den Bergh
10 The economics of water use David Zilberman and Leslie Lipper 1. Introduction Water resources serve multiple purposes in meeting human needs and their allocation has been subject to dispute throughout man’s history. Rapid population growth has resulted in increased water scarcity, and interest in the pursuit of improved productivity in water resource management. A substantial literature on the economics of water resource management and policy making has been generated, resulting in considerable advances in the field of resource and environmental economics. (See Boggess et al., 1993 and Young and Haveman, 1985 for a good review of recent literature.) This paper overviews the main research issues in the economics of water use,’ with an emphasis on models unique to water management. On the global level, irrigated agriculture is by far the largest consumer of water among various users, and concern over improving water use efficiency in this sector has been widely reflected in the water economics literature. The emphasis in this chapter is on water use in agriculture and its impact on the environment because much of the political debate in recent years has centred on use in this sector, and many of the conceptual and methodological issues that have been raised in addressing agricultural water issues apply in other sectors as well. We begin our overview by looking at water use efficiency at the farm level. We present an economic model of on-farm water use incorporating environmental and technical factors which influence farmers’ irrigation management choices. In Section...
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