Optimal resource allocation, pricing, investment and market structure under a spatial externality: the case of irrigation

Abstract

This dissertation develops the economic principles for spatial water allocation, pricing and Investment in water conveyance and on-farm technology for large-scale irrigation systems. Although Irrigation Is emphasized, the results obtained are applicable to other public utilities such as electricity, natural gas and transportation. The effect of marginal cost pricing on the welfare of farmers located at various distances from the water source Is examined, and a1tematlve taxation mechanisms are proposed. The study examines the differential Impact of private and public Irrigation Investments on resource rents accruing to beneficiaries, as well as on Irrigated acreage and aggregate output. Performance of purely decentralized Irrigation systems are compared to socially optimal and monopolistic regimes, under a range of plausible assumptions of demand elasticity, The theoretical results are Illustrated with secondary data from California and Pakistan.