The spatial distribution and determinants of irrigators’ price choices for water entitlement trading

ABSTRACT

Although many studies have examined irrigators’ water trading behaviour, little is known about how irrigators value their water, especially for their water entitlements (permanent water rights). This article’s aim is to assess the determinants of irrigators’ values for their water (i.e. price choices for selling and buying of water entitlements). Specifically, we focus on spatial determinants and how irrigators’ price choices vary spatially. We used stated preferences data from an irrigator survey in the southern Murray-Darling Basin (MDB) in Australia at the end of the Millennium drought (2011). It was found that (spatial) influences affect the price choices of the selling and buying decision differently depending e.g. on irrigators’ location in the southern MDB, i.e. with regards to rural areas, lower resource areas and the regional socio-economic index. Furthermore, irrigators’ valued their water differently if they owned it compared to if they were going to own it, which may relate to the ‘endowment effect’.

KEYWORDS:

• Water trading
• water entitlements
• irrigators
• spatial influences

Acknowledgments

I greatly appreciate the work and support of Prof Sarah Wheeler and Assoc. Prof Alec Zuo in this project. Furthermore, I thank the two anonymous reviewers for their time and feedback, which have improved this article. This study was funded by Australian Research Council DP200101191 and FT140100773.

Disclosure statement

The author declares no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Notes

1. Two major types of water rights are traded in Australia, namely water entitlements (permanent rights to a share of water and referred to as permanent trading) and water allocations (seasonal and proportional access to a share of water and referred to as temporary trading) (COAG 2004).

2. The security type of water entitlements describes the probability of the water being fully available from year to year. High security water entitlements provide a highly reliable water supply (usually full allocation 90–95 years out of 100) with little variation between years. Low/general security water entitlements provide a variable or uncertain water supply.

3. ML = Megalitre (one million litres)

4. This 2011 mail-out survey was a follow-up-survey from a telephone survey conducted in 2010 and contacted a farm list of irrigators which was used for the previous survey. The survey reached a 63% response rate. Comparisons were made with the original sample of the telephone survey and other regional data from the Australian Bureau of Statistics (ABS)and Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), which confirmed that there was no non-response bias and that the survey results were highly representative for the southern MDB (e.g. Zuo et al. 2015b).

5. We tested the effect of differing population sizes (i.e. for over 1,000, 5,000 and 10,000 people). Although not significant, results indicated that distance to cities may have differing impacts depending on the population size of the city. Future research needs to investigate this further to reveal the differing effects and characteristics of those cities. Differing impacts may depend on the specific region, the distances between those cities and differing infrastructure and services provided by or near the city.

Additional information

Funding

This work was supported by the Australian Research Council [FT140100773]; Australian Research Council [DP200101191].

Notes on contributors

Juliane Haensch

Juliane Haensch is a Postdoctoral Researcher at the Chair of Agricultural Market Analysis at the Department for Agricultural Economics and Rural Development at the University of Göttingen (Germany) and an Adjunct Research Fellow at the Centre for Global Food and Resources at the School of Economics and Public Policy at the University of Adelaide (Australia).