Ebook Water Market And Coordination Failures: The Case Of The Limari Valley In Chile
The ideas for this thesis were developed in three stages. In the first stage, previously to writing my dissertation proposal, I was mainly interested in issues related to the debate about a new water legislation in Perú in the 1992-1994 period. Almost half of Peruvian agriculture is irrigated, all the Coast region and part of the Andean region. A new water legislation was considered a very important reform affecting the future of Peruvian agriculture.
At that time, the Peruvian government wanted to change the 1969 Water Code introducing legislation similar to the Chilean Water Code of 1981. The Chilean Code privatized water rights and promoted the functioning of water markets for allocating water among alternative uses both inside agriculture and among different sectors. It ended most of the State capacity for allocating and regulating the supply of water resources.
With a Tinker Foundation scholarship for pre-dissertators I visited Chile in 1994 to gather information on the Chilean Water Code and the functioning of agricultural water markets. I found an ongoing debate about the problems with the existent water legislation, mainly the extreme accumulation of water rights by hydropower firms and the Code’s inability to cope with the complex conflicts among agriculture, electricity and mining sectors. In terms of agriculture water markets themselves (i.e. water trade among farmers in irrigated areas), the evidence was showing that these markets were very thin or nonexistent, except for specific areas in the drier northern region.
I learned that of one of these areas, in which an agriculture water market was active, was the Limarí Valley in the IV Region (400 Km from Santiago), where one of the country’s largest reservoirs (Paloma Reservoir, with 700 million m3) irrigates about 30,000 Has. Farmers traded water both in permanent rights as well as in seasonal quantities (rental market). The functioning of this market was not very well known in Chile at that time, although a first study was started focusing on exchanges between agriculture and the urban sector.
Contents
Abstract
Chapter 1: Introduction
Chapter 2: Water allocation problems in the Economics Literature
2.1. Special features of water
2.2. Water allocation as a collective action problem
2.3. Water subsidies and irrigation problems
2.4. Irrigation management and the “syndrome of anarchy”
2.5. Local management of irrigation
2.6. Functioning of water markets and the formation of water prices
Chapter 3: The Limarí Valley: Irrigation Infrastructure and Water Institutions
Introduction
3.1. The Chilean Water Code
3.1. Some evidence about water markets in Chile
3.2. Evolution and current status of the water infrastructure in the Limarí Valley
- 3.2.1. Evolution of water infrastructure
3.2.2. Current water infrastructure
3.2.2. Current water infrastructure
- The Recoleta sub-system
The Cogotí Sub-system
The Paloma Sub-system
3.3. Water management and water institutions in the Paloma-Limarí System
Chapter 4: The Limarí Valley: Crop structure and Water Market Operation
Introduction
4.1. Recent Changes and the Current Crop Structure in the Limarí Valley
4.2. Describing farmers, their production technologies and access to markets
- 4.2.1 Geographical distribution
4.2.2. Farmers’ features
4.2.3. Production assets
4.2.4. Irrigation assets and techniques
4.2.5. Differences in Input use
4.2.6. Access to credit and subsidies
4.3. The workings of the spot water market in the Limarí Valley
- 4.3.1. Price behavior
4.3.2. Water market and transaction costs
4.3.3. Water market participation and farmers´ type
4.4. Main features of the water market in the Limarí Valley: motivating a micro-economic analysis
- 4.4.1. Profitability and sunk costs
4.4.2. Water price distribution and non-convexities
4.4.3. Water market, coordination failures and allocation efficiency
Chapter 5: A Micro-economic Model of Coordination Failures and Water Market Dynamics
Introduction
5.1. Model’s fundamentals
- 5.1.1. The time framework for decisions
5.1.2. Crop choice, risk preferences and technology
5.2. Second period optimal decisions
5.3. The first period decision problem
5.4. Comparing aggregate output and profits in alternative “worlds”
- Model A: autarchy in a perfect world
Model B: autarchy in an imperfect world
Model C: Trade in a perfect world
Model D: Trade in an imperfect world
5.5. Simulation routine and results
Appendix 5.1: Net Water Supply and Market dynamics simulation
Appendix 5.2: Indirect Profit function and the first period decision problem
Chapter 6: Econometric estimations of Water Net Supply Functions
Introduction
6.1. Modeling water market participation
6.2. Measuring unobserved variable “s1”
6.3. Estimating an ordered probit model of water market participation
6.4. Estimating water supply and demand using censored regression models
Appendix 6.1.: Limitations of the Econometrics
Chapter 7: Discussing alternatives for improving the efficacy of the water market in the Limarí Valley
Introduction
7.1. Technological innovations: drip irrigation
7.2. Reducing transaction costs: introducing a water price information system
7.3. Institutional innovations: re-defining rules for reservoir management and water rights
- Location-specific water losses
Mobility of water endowments
Water saving
7.4. Concluding remarks
Bibliography
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