Groundwater Overdraft, Electricity, and Wrong Incentives: Evidence from Mexico

No 2016.05, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: Groundwater overdraft is threatening the sustainability of an increasing number of aquifers in Mexico. The excessive amount of groundwater extracted by farming activities relying on irrigation methods have significantly contributed to this problem. The objective of this paper is to analyse the effect of changes in groundwater's price over the allocation of different production inputs from a structural approach. Using a combination of multiple micro-data sources, I model the technology of producers facing groundwater overdraft through a Translog cost function. The results following this analysis show that groundwater's own price elasticity for the sample analysed is -0.54. Moreover, these results also show that both labour and fertiliser can act as substitutes for groundwater, further reacting to changes in groundwater's price.

Keywords: Groundwater; Electricity; Subsidies; Mexico; Translog Cost (search for similar items in EconPapers)
JEL-codes: Q12 Q25 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2016-02
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2016.05

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