The Economics of Water: The Effects of Irrigation on Average Farm Revenue

By 2025, water withdrawals are expected to increase by 50% in developing countries and 18% in developed countries. By 2050, 2.7 billion people will need to draw from our current source of freshwater; irrigated agriculture currently accounts for 40% of all food production. With the demand for irrigation water rapidly increasing and supply being finite, issues related to conservation, allocation and policy are becoming more and more important. This investigation is aimed at analyzing production behavior through a study of average farm revenue and several input demand variables. It is found that farmers seek to maximize profit through increased water application rates as well as production of high -valued, water -intensive crops. Through an understanding of what drives production behavior, policy makers can increase their understanding of irrigation water importance as well as properly control its usage. Furthermore, by investigating water consumption in the largest water using sector (agricultural production), the world can come to a better understanding of the importance of irrigation in the agricultural industry as well as the impact of decreases in water availability on food production.

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Journal Article
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SS-AAEA Journal of Agricultural Economics, 2015
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 Record created 2017-04-01, last modified 2017-09-20

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