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Abstract
In the light of growing water scarcity appropriate institutional arrangements
are needed to complement technical interventions, in order to ensure more efficient
use and allocation of water in agriculture. A theoretically interesting institutional
intervention is the installation or improvement of water rights, but the benefits of
such intervention and their distribution are insufficiently researched. This paper contributes
to the water rights literature by applying a state-of-the-art valuation method
to a case study in South Africa. Using a latent class choice modelling approach the
heterogeneity in the benefits generated by changes in water rights is investigated. Two
segments could be distinguished in the sample population. While one of the segments
has a lot to gain from a water rights reform, benefits for the other seem rather limited.
Furthermore they clearly differ in preference for specific improvements. Such considerations
should be taken into account in policy design.