Economic Valuation of Agricultural Water Use for Large-Scale Modeling

by Richard Howitt,
Kristen Ward,



Document Type: Proceeding Paper

Part of: WRPMD'99: Preparing for the 21st Century

Abstract: (No paper) A state-wide irrigated agricultural production model has been developed for California. The model is an extension of the Central Valley Production (CVP) Model that was most recently used for the CVP Programmatic Environmental Impact Statement. The model simulates decisions of agricultural producers regarding choice of crop, planted area and investment in irrigation technology. It assumes that farmers will maximize their profit subject to various resource, technical and market constraints. The primary model components are crop and regional specific production functions. The production functions express crop production as a matrix quadratic function of land, applied irrigation water, and capital expenditures on irrigation which models the relationship between water use efficiency and irrigation technology and physical constraints of land and water. The model uses a Maximum Entropy calibration technique. The model is calibrated using observed cropped data and input use and prices. The parameters of a quadratic cost function are determined so that the model exactly predicts the observed cropped acreage, given the base year parameters. The model is run repeatedly for a range of annual regional water supplies, which are input as resource constraints. Using a monthly time step, the model calculates the shadow value of the water constraint. This shadow value can be interpreted as the farmers monthly willingness to pay for additional water supplies.

Subject Headings: Hydrologic models | Irrigation | Irrigation water | Economic factors | Water use | Water supply systems | Water conservation | Crops | North America | California | United States

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