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Abstract
This paper examines the preferred governmental intervention towards crops growing methods in semi-arid regions. These
regions are characterized by an average amount of rain which is sufficient to grow the crop but it is also very risky. The
farmers' attitude towards risk motivates the government to encourage them to shift to more profitable and riskier crop
rotations. The paper analyses two alternatives of which the government can work through: drought compensation scheme
(DCS) and water price support (WPS). The semi-arid region in Israel is analyzed and policy conclusions are derived. In
particular it is shown that for different sub-regions within the semi-arid region different mechanisms are preferred by the
government and the farmers. Sometimes these mechanisms coincide and sometimes they do not. A welfare analyzes compares
the different situations. © 1999 Elsevier Science B.V. All rights reserved.