The responsiveness of Australian farm performance to changes in irrigation water use and trade, by Rosalyn Bell, Jyothi Gali, Paul Gretton and Ineke Redmond was presented to the 51st Annual Conference of the Australian Agricultural and Resource Economics Society, in Canberra on 14th - 16th February 2007.

The flexibility of farms to respond to changing economic or environmental conditions has received attention in recent years, particularly in the context of changes in the availability and pricing of irrigation water. This study uses a new unit record data set of Australian farms and a generalised profit-function framework to assess the links between farm performance and water use practices, involvement in water trading and other farm characteristics.

Amongst other findings, the study provides experimental estimates of the responsiveness of the demand for irrigation water to price changes and the impact of farmers either buying or selling water on farm profits, after controlling for other factors.

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Contents

1 Introduction

2 Background
The importance of irrigation and water trade
Farm performance

3 Analysis
Modelling framework
Model specification
Model estimation and explanatory power
Elasticity estimates
Responsiveness of farm performance to water trade

4 Conclusions

Appendix A Likelihood of water trade

References

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