This work presents models that characterize the relationships between quantity and quality of irrigation water application, and agricultural production and the environment. A comprehensive modeling approach addressing both the benefits of irrigation and the potential negative effects is introduced. Physical-biological concepts are combined with economic and engineering principles to demonstrate the usefulness of the model for analyzing various water management and policy issues. Decision makers on all levels should find the modeling approach interesting and useful in the management issues from the farm to national levels.

The book details the innovative TERM (The Enormous Regional Model) approach to regional and national economic modeling, and explains the conversion from a comparative-static to a dynamic model. It moves on to an adaptation of TERM to water policy, including the additional theoretical and database requirements of the dynamic TERM-H2O model. In particular, it examines the contrasting economic impacts of water buyback policy and recurring droughts in the Murray-Darling Basin. South-east Queensland, where climate uncertainty has been borne out by record-breaking drought and the worst floods in living memory, provides a chapter-length case study. The exploration of the policy background and implications of TERM’s dynamic modeling will provide food for thought in policy making circles worldwide, where there is a pressing need for solutions to similarly intractable problems in water management.

This book includes a set of papers from distinguished scholars who critically examine economic issues relating to the relationship between water and agriculture, with a special focus on irrigation. Employing state of the art methodologies, they address the most relevant issues in water policy. The volume offers a wide spectrum of innovative approaches and original and relevant cases with a focus on irrigated European agriculture. The topics analyzed include qualitative and quantitative issues, water markets, demand analysis, economic analysis, implementation of economic issues.

The purpose of this book is to develop a general economic model which integrates the quantity and quality issues of water resource management and to provide, along with a detailed criticism of the policy instruments now in use, alternative proposals concerning the efficient allocation and distribution of water. In particular we treat water as a multi-product commodity where the market plays a major role in determining water quality-discriminant pricing and its value to the user. We examine the process of moving from administrative allocation and regulation to privatization of the water industry as the key element in promoting effective competition and in providing economic incentives for greater efficiency. Water quantity and quality, considered independently of each other, have been the subject of numerous studies during the last twenty years. Let us recall briefly the most outstanding among them. A variety of models have been constructed concerning the optimal scheduling and sequence of water-supply projects: dynamic programming for solving multi-bjective functions in water resource development; planning models for coordinating regional water-resource supply and demand, etc. Other studies have devised water-quality management models, including multi-period design of regional or municipal wastewater systems; cost-allocation methods to induce effluent dischargers to participate in regional water systems; models to predict the quality of effluent (in particular, whether it meets certain established standards); models for finding optimal waste-removal policies at each of the polluting sources, and so on.

The marginal price elasticities estimated by Martinez-Espineira conforms to expectation. The price specification that accounts for the changing proportion of water users in each block yields a higher elasticity (-0. 47) compared to the spec ification ignoring this feature of the data. However, this difference is not found to be statistically significant, a result attributed to the low power of the test (small sample size limiting the accuracy of estimates). In conclusion, the paper provides a theoretically correct price specification for demand functions under block pricing and aggregate data. The empirical findings in the paper, however, are not conclusive and further empirical work using more data and alternative (nonlinear) demand functions, is needed to show the practical implications of the arguments put forward by the Martinez-Espineira's paper. Static empirical consumer demand functions estimated with aggregate data are well known to suffer form serial correlation and other statistical problems asso ciated with misspecified dynamics. These dynamics arise because consumers do not react immediately to a change in prices due to their largely predetermined lifestyle. In the case of demand for water, for example, current purchases can be largely predetermined due to commitments arising from past purchases such as swimming pools, bathtubs, dishwashing machines, etc. Muellbauer and Pashardes (1992) show that the autoregressive nature of consumer demand data can be cap tured in a theoretically consistent manner by incorporating intertemporal aspects of consumer behaviour in the model through habit formation and durability.

The world is facing severe and growing challenges in maintainig water quality and meeting the rapidly growing demand for water resources. In addition, water used for irrigation, the largest use of water in most developing countries, will likely have to be diverted increasingly to meet the needs of urban areas and industry whilst remaining a prime engine of agricultural growth. Finally, environmental and other in-stream water demands become more important as economies develop. The river basin has been acknowledged to be the appropriate unit of analysis to address these chanllenges facing water resources management: and modeling at this scale can provide essential information for policy makers in their decisions on allication of resources. This paper reviews the state of the art of modeling approaches to integrated water resources management at the river basin scale, with particular focus on the potential of coupled economic hydrologic models, and concludes with directions for future modeling exercises.