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Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information
Author(s) -
Dridi Chokri,
Khanna Madhu
Publication year - 2005
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2005.00722.x
Subject(s) - appropriation , irrigation , adverse selection , incentive , information asymmetry , business , water right , water trading , doctrine , water conservation , water resources , natural resource economics , economics , environmental economics , microeconomics , finance , linguistics , ecology , philosophy , theology , biology
We develop a water allocation and irrigation technology adoption model under the prior appropriation doctrine with asymmetric information among heterogeneous farmers and between farmers and water authorities. We find that adverse selection reduces the adoption of modern irrigation technology. We also show that even with asymmetric information, incentives for water trade exist and lead to additional technology adoption with gains to all parties. This suggests that under asymmetric information, a thin secondary market improves the allocation of water resources and induces additional adoption of modern irrigation technologies.