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Irrigation water demand and implications for water pricing policy in rural China

Published online by Cambridge University Press:  26 February 2010

QIUQIONG HUANG ,
SCOTT ROZELLE ,
RICHARD HOWITT ,
JINXIA WANG  and
JIKUN HUANG
QIUQIONG HUANG
Affiliation:
Department of Applied Economics, University of Minnesota, Classroom Office Building 249e, 1994 Buford Ave. St. Paul, MN 55108, USA. Tel: (612) 624-1692. Fax: (612) 625-6245. Email: qhuang@umn.edu
SCOTT ROZELLE
Affiliation:
Shorenstein Asia Pacific Research Center, Freeman Spogli Institute, Stanford University, Stanford, CA, USA. Email: rozelle@stanford.edu
RICHARD HOWITT
Affiliation:
Department of Agricultural and Resource Economics, University of California, Davis, CA, USA. Email: howitt@primal.ucdavis.edu
JINXIA WANG
Affiliation:
Center for Chinese Agricultural Policy, Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, China. Email: jxwang.ccap@igsnrr.ac.cn
JIKUN HUANG
Affiliation:
Center for Chinese Agricultural Policy, Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, China. Email: jkhuang.ccap@igsnrr.ac.cn
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Abstract

The goal of this paper is to analyze whether reforming groundwater pricing has the potential to encourage water conservation and assess its impacts on crop production and producer income in rural China. Household-level water demands are estimated so that adjustments at both the intensive and extensive margins are captured. The results show that a large gap exists between the cost of water and the value of water to producers. Simulation analysis shows that reforming water pricing can induce water savings. However, the price of water needs to be raised to a relatively high level. We also find that the value-based policy is more effective than the cost-based policy since it generates larger water savings, given the same increase in the average price of water. While raising the price of water negatively affects crop production and crop income, higher water prices do not adversely affect the distribution of household income.

Type
Research Article
Information
Environment and Development Economics , Volume 15 , Issue 3 , June 2010 , pp. 293 - 319
Copyright
Copyright © Cambridge University Press 2010

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