Koundouri, Phoebe (2000): Three approaches to measuring natural resource scarcity: theory and application to groundwater. Published in: (24. October 2000)
Download (944kB) | Preview
Efficient pricing of a resource incorporates both marginal cost of extraction and scarcity rents. Since groundwater resources exhibit natural supply constraints, scarcity rents must be imposed on current users. Given the difficulty of establishing clear groundwater ownership rights, scarcity value frequently goes unrecognized and is difficult to estimate. This results in inefficient pricing and misallocation of the resource. This thesis builds on three different methods to develop appropriate theoretical and empirical models relevant for indirect estimation of these shadow scarcity rents, which we consider as the initial and most challenging step towards efficient groundwater management. Empirical analyses are based on economic and hydrological data from t he island of Cyprus, representative of semi-arid regions. Chapter 2 critically assesses previous theoretical and empirical attempts to derive the increase in social benefits from efficient pricing of groundwater and examines the potential for groundwater management. This potential is seriously challenged by Gisser-Sanchez's Effect (GSI): i.e. net benefits from optimally managing groundwater are insignificant for all practical purposes. Chapter 3 attempts a reexamination of GSI by developing a dynamic model of adaptation to increasing groundwater scarcity, when backstop technology is available. Both groundwater scarcity rents and management benefits are derived by simulating the optimal and competitive-commonality solutions. Results point to the absence of GSI in aquifers facing complete exhaustion in the near future. Chapter 4 proposes a refinement of revealed preference methods of valuation, by combining the hedonic and travel cost methods, and applies the refined model to derive the willingness to pay for groundwater quality. It is claimed t hat hedonic valuation of quality attributes can be misleading when the exogeneity assumption, with respect to these attributes, to sample selection is violated. Hence, the simultaneity between hedonic valuation and sample selection is modelled in the context of producer behaviour and investigated empirically in the case of land demanded for use as an input either in agricultural production or touristic development. The empirical analysis suggests that failing to correct for sample selection results in a biased valuation of groundwater quality. In chapter 5 duality theory is employed to develop the distance function methodology of deriving shadow groundwater scarcity rents. The empirical application of the model involves estimating a stochastic input distance function from which the in situ shadow price of groundwater is derived. Chapter 6 concludes the thesis by comparing and contrasting the magnitude of groundwater scarcity rents and willingness to pay for scarce groundwater quality, derived from the models put forward in this research.
|Item Type:||MPRA Paper|
|Original Title:||Three approaches to measuring natural resource scarcity: theory and application to groundwater|
|English Title:||Three approaches to measuring natural resource scarcity: theory and application to groundwater|
|Keywords:||Natural resources; scarcity; groundwater|
|Subjects:||Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics
A - General Economics and Teaching > A1 - General Economics > A13 - Relation of Economics to Social Values
A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q25 - Water
|Depositing User:||Phoebe Koundouri|
|Date Deposited:||19. Oct 2012 13:36|
|Last Modified:||13. Feb 2013 05:15|
Ahrens, W. A., and Sharma, V. R., 1977. Trends in natural resource commodity prices: deterministic or stochastic? Journal of Environmental Economics and Management. 33(1): 59-74.
Aigner, D., and Chu, S., 1968. On estimating the industry production function. American Economic Review. 58: 826-839.
Aigner, D., Lovell, C. A. K. and Schmidt, P. J., 1977. Formulation and estimation of stochastic frontier production function models. Journal of Econometrics.6(1): 21-37.
Amemiya, T., 1984. Tobit Models: A Survey. Journal of Econometrics. 24: 3-63.
Amemiya, T., 1985. Advanced Econometrics. Harvard University Press.
Anderson, J. E., Bannister, G., J., and Neary, J., P., 1995. International Economic Review. 36(1): 139-57.
Anderson, T. L., Burt, O. R., and Fractor, D. T., 1983. Privatizing groundwater basins: a model and its application. In T. L. Anderson (ed.): Water Rights: Scarce Resource Allocation, Bureaucracy, and the Environment}. Pacific Institute for Public Policy Research.
Antoniadou, E., 1997. Lattice programming and economic optimization: Part I, Techniques. Unpublished Manuscript.
Atkinson, S., and Halvorsen, R., 1986. The relative efficiency of public and private firms in a regulated environment: The case of US. electric utilities.Journal of Public Economics.} 29: 281-294.
Barnett, H. J. and Morse, C., 1963. Scarcity and Growth - The Economics of Natural Resource Availability.} Baltimore, M.D.: JohnsHopkins University Press.
Berck, P. and Perloff, J. M., 1984. An open-access fishery with rational expectations. Econometrica. 52: 489-506.
Brill, T. S., and Burness, H. S., 1994. Planning versus competitive rates of groundwater pumping, Water Resource Research. 30(6): 1873-1880.
Chermak, J. M., and Patrick, R. H., 1999. A microeconometric test of the theory of exhaustible resources. Journal of Environmetal Economics and Management, forthcoming.
Cheung, S. N. S., 1970. The structure of a contract and the theory of a non-exclusive resource. Journal of Law and Economics. 13:49-70.
Halvorsen, R. and Smith, T. R., 1984. On measuring natural resource scarcity. Journal of Political Economy. 92(51): 954-964.
Heckman, J., 1976. The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models, Annals of Economic and Social Measurement. 5: 475-92.
Lewis, T. R., 1982. Sufficient conditions for extraction least cost resource first. Econometrica. 50: 1081-83.
Provencher, B., and Burt, O., 1994. A private property rights regime for the commons: the case for groundwater. American Journal of Agricultural Economics. 875-888.
Reilly, T. E., and Goodman, A., S., 1985. Quantitative analysis of saltwater-freshwater relationships in groundwater systems: A historical perspective. Journal of Hydrology.}80: 125-160.
Sax, J. L., 1968. Water Law, Planning and Policy: Cases and Materials. Indianapolis: Bobbs-Merrill.
Shephard, R. W., 1970. Theory of cost and production functions. Princeton University Press, Princeton.
Sloggett, G., and Mapp, H. P. Jr., 1984. An analysis of rising irrigation costs in the Great Plains. Water Resources Bulletin. 20(2): 229-233.
Smith, V. L., 1969. On models of commercial fishing. Journal of Political Economy. 77: 181-198.
Smith, V. L., 1977. Water deeds: a proposed solution to the water valuation problem. Arizona Review. 26: 7-10.
Sobel, M. J., 1975. Reservoir management models. Water Resources Research. 11: 767-776.
Solow, R. M., 1974. Intergenerational equity and exhaustible resources. Review of Economic Studies. 41: 29-45.
Solow, R. M., and Wan, F. Y., 1976. Extraction costs in the theory of exhaustible resources. The Bell Journal of Economics.7:359-70.
Spence, A. M., 1979. Investment strategy and growth in a new market. Bell Journal of Economics. 10: 1-19.
Spulber, D. F., 1980. Research and development of a backstop energy technology in a growing economy. Energy Economics}. 2(4): 199-207.
Tsur, Y., 1990. The stabilization role of groundwater when surface water supplies are uncertain: the implications for groundwater development. Water Resources Research. 26: 811-18.
Tsur, Y. and Graham-Tomasi, T., 1991. The buffer value of groundwater with stochastic surface water supplies. Journal of Environmental Economics and Management. 21: 201-24.
Tsutsui, S. and Mino, K., 1990. Nonlinear strategies in dynamic duopolistic competition with sticky prices. Journal of Economic Theory. 52: 136-61.
Ulph, A., 1998. Learning about global warming. In: Hanley, N., and Folmer, H. (eds.), Game Theory and the Environment. Edward Elgar.
Van der Ploeg, F., 1987. Inefficiency of credible strategies in oligopolistic markets with uncertainty.Journal of Dynamics and Control. 11: 123-145.
Vaughan, W. J. and Clifford, S. R., 1982. Valuing a fishing day: an application of a systematic varying parameter model. Land Economics. (November): 450-63.
Ward, F. A., 1979. The net social benefits from a research-induced cost-reduction of an energy backstop technology.American Journal of Agricultural Economics. 61(4): 668-75.
Weitzman, M. L., 1974. Free access versus private ownership as alternativesystems for managing common property. Journal of Economic Theory.} 8: 225-34.
Wetzel, B., 1978.Efficient Water Use in California: Economic Modelling of Groundwater Development with Application to Groundwater Management. Santa Monica, CA: Rand Corporation.
White, G. F., 1993.Water in Crisis.McGraw-Hill. Wirl, F. and Dockner, E., 1995. Leviathan governments and carbon taxes: Costs and potential benefits. European Economic Review. 39:1215-1236.
Wolfram, S., 1999. The Mathematica Book. 4th ed.,Wolfram Media / Cambridge University Press.
World Commission on Environment and Development, 1987. Our Common Future. Oxford: Oxford University Press.
Worthington, V. E., Burt, O. R. , and Brustkern, R. L., 1985. Optimal management of a confined aquifer system. Journal of Environmental Economics and Management. 12: 229-245.
Young, R. A., and Bredehoeft, J. D., 1972. Digital computer simulation for solving management problems of conjunctive groundwater and surface water systems. Water Resources Research. 8(3): 533-556.
Young, R., A., Daubert, J., T., and Morel-Seytoux, J., 1986. Evaluating institutional alternatives for managing an interrelated stream-aquifer system. American Journal of Agricultural Economics. November: 787-797.
Young, D., and van Kooten, G. C., 1988. Incorporating risk into a dynamic programming application: flexcropping: an Economic Analysis of Risk Management Strategies for Agricultural Production Firms. Proceedings of a seminar sponsored by Southern Regional Project S-180. }Department of Economics and Business, North Carolina State University, Raleigh.
Zimmerman, W. R., 1990. Finite hydraulic conductivity effects on optimal groundwater pumping rates. Water Resources Research. 26(12): 2861-2864.