Spatial water allocation under conjunctive use

Abstract

This dissertation studies the optimal allocation for conjunctive use of surface and groundwater. The optimal model defines economic principles which determine the spatial allocation of surface and groundwater, the level of conveyance expenditure, the level of on-farm investment in water conservation, and shadow prices of surface and groundwater. The static spatial model identifies the economic principles which govern water allocation for conjunctive use of surface and groundwater. Two models, seepage in the canal and seepage in the canal and on the field are considered. The optimal water allocation is examined with fixed on-farm investment in water conservation and with different canal loss rates. The static base model is extended to incorporate endogenous on-farm investment in water conservation and to consider the effect of the seepage rate on choice of technology, conveyance expenditure, water allocation and land rents. Analytical results are obtained for endogenous crop choice when land quality is homogeneous and shadow price of water is spatially increasing. The study compares the effects of heterogeneous land quality, changes in output price, pumping cost, uniform price for groundwater, and uniform prices for water such as the marginal cost of water generation at the source. The spatial dynamic model of conjunctive water use defines conditions which govern the intertemporal and spatial optimal allocation of water. Five important results are as follows: (i) When seepage is small, the conjunctive use model does not make a significant difference, and the surface water model is a good approximation of the conjunctive use model. (ii) Additional seepage from the field generates a positive externality to water consumers and the resulting optimal shadow price of water is less than the shadow price of the utility. (iii) An output price increase, heterogeneous land quality, and a fixed price for water generate huge aggregate land rents. (iv) Spatial inequity of land rents is worsened by heterogeneous land quality. (v) Temporal allocation of water resources is governed by the Hotelling rule variant similar to the optimal allocation rule for exhaustible resources.