insights from hydroeconomic modeling - world...
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J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 1 / 25
Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014
Insights from
Hydroeconomic Modeling
James Booker
Siena College
Loudonville, NY
J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 2 / 25
Outline
1. Examples of hydroeconomic models.
2. Model estimates, baselines, and benefit-cost
analysis.
3. Implicit single factor productivity estimates
4. Towards TFP
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Systems approach
focusing on interdependencies
source: Cai, McKinney, and
Lasdon, JWRPM, 2003
J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 4 / 25
source: Cai, McKinney, and
Lasdon, JWRPM, 2003
J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 5 / 25
source: Booker & Young,
JEEM, 1994
J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 6 / 25
source: Cai, McKinney, and
Lasdon, JWRPM, 2003
J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 7 / 25
A hydroeconomic model is a system-wide
maximization of net benefits
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Water demand functions for each user
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System-wide solution I:
allocation by non-economic rule
where value V is used to force allocation between users
according to purely non-economic priorities.
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System-wide solution I:allocation by maximizing net benefits
Objective function based purely on economic benefits
net of explicit costs:
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Estimating marginal values of the irrigation water input
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Residual imputation for
estimating irrigation water demand
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Deficit irrigation / direct crop response may be added
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Ultimately …
Use mathematical programming techniques
to estimate farm / regional benefits as total
irrigation water supply is varied.
Fit these results to a convenient functional
form, and each regional user then has a
water demand function.
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Water demand functions for each user
J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 16 / 25
source: Cai, McKinney, and
Lasdon, JWRPM, 2003
J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 17 / 25
Model solution
maximize selected measure of net benefits
subject to
• hydrologic constraints
• acreage constraints
• technology constraints
• institutional / operations constraints
• other
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Hydroeconomic model optimization provides
accounting of diversions, instream flows, and
multisectoral use impacts
source: Cai, McKinney, and
Lasdon, JWRPM, 2003And – implicitly includes water
opportunity costs / nonpriced
impacts on other users.
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Explicit baseline typically defined
source: Cai, McKinney, and
Lasdon, JWRPM, 2003
J. Booker, Siena College Going Beyond Agricultural Water Productivity, World Bank Workshop, 8 Dec., 2014 page 20 / 25
One interpretation: this a NPV estimate
source: Cai, McKinney, and Lasdon, JWRPM, 2003
NPV of moving from standard operating criteria
to those maximizing quantified net benefits is
3.76 – 2.86 = 0.90 billion USD . But –unique BCR difficult :
treatment of nonpriced
opportunity costs ?
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A second interpretation: this a “crop per drop”
change
source: Cai, McKinney, and Lasdon, JWRPM, 2003
Baseline: “Crop per drop” = (3570*0.74)/51.8 = 51;
Full-optimize: “Crop per drop” = (3570*0.89)/45.6 = 64;
=> Increase of 25% .
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Their text: full optimization (FOP) vs. baseline
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Continuing with Cai, McKinney, and Lasdon, 2003:
If we look just at local water withdrawal “crop per drop,” then this
increases by 70% to 120% (holding yield impacts constant).
c.f. a full basin increase of just 25% .
Water delivery efficiency Irrigation efficiency Total change
before after before after before after
0.5 0.7 0.5 0.8 0.25 0.56
0.6 0.8 0.65 0.85 0.39 0.68
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Hydroeconomic modeling easily provides
single factor productivity
• Basin wide measures will be very different
from local / regional productivity measures
• Consumptive use versus withdrawals
matters:
– productivity will differ
– changes in productivity will differ
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Towards TFP measures from
hydroeconomic modeling
• Are there conceptual issues preventing comparison of
TFP between scenarios?
(e.g. treatment of scarcity costs as an input?)
• What are the practical challenges?
• What interpretations add value to our understanding of
– Hydroeconomic modeling estimates
– Traditional TFP estimates abstracting from hydrologic and
geographic details
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