A theoretical economic model of the demand for irrigation water

Abstract Projected changes in global climate might make irrigation a more attractive option for farmers in historically rain-fed agricultural regions. If irrigation water becomes an economic input in field crop production in this type of region, this would give rise to a derived demand for irrigation water by farmers. Many existing models of irrigation water use are based on estimated crop requirements but are not necessarily consistent with an economic approach to modeling the derived demand for an input. The purpose of this paper is to develop an economic model of the demand for irrigation water treating irrigation as a damage control input. The production economics of damage control inputs has been applied in pest management in crop production and was suggested as an approach to modeling the demand for irrigation water by Fox and Weersink (1995) but, to date, this extension has not been undertaken. Our model uses a two-input approach with both a von Liebig and a quadratic functional form of the relationship between inputs and yield. We treat the damage agent, water deficit, and the control agent, irrigation water, as perfect substitutes. As a result, the control function is linear. Compared with a water requirements approach, sometimes called an engineering method by economists, our economic approach has the potential to increase net benefits to farmers and to encourage more efficient water use.