Natural Resources, School of


Document Type


Date of this Version

September 2006


Published in WATER RESOURCES RESEARCH, VOL. 42, W09411, doi:10.1029/2005WR004096, 2006. Copyright 2006 by the American Geophysical Union.


Using panel data from a period of water rate reform, this paper estimates the price elasticity of irrigation water demand. Price elasticity is decomposed into the direct effect of water management and the indirect effect of water price on choice of output and irrigation technology. The model is estimated using an instrumental variables strategy to account for the endogeneity of technology and output choices in the water demand equation. Estimation results indicate that the price elasticity of agricultural water demand is -0.79, which is greater than that found in previous studies.