TY  - EJOUR
AB  - It has long been recognised that the mechanism for funding irrigation infrastructure
in Australia may be incompatible with efficient trade in the rural water market. If
the revenue received by an irrigation operator is dependent on the volume of water
entitlements held in the operator’s region, out-of-region permanent water sales
threaten the operator’s revenue stream, potentially leading to higher charges on
remaining irrigators, encouraging an inefficient ‘rush for the exit’. In response,
irrigation operators have imposed restrictions on permanent water trade, such as exit
fees and termination fees, to protect their revenue stream. Previous economic analysis
has suggested that exit fees, in particular, are a barrier to efficient trade in the water
market and should be abolished. In contrast, this paper argues that allowing irrigators
to cancel their water delivery rights without fees or charges leads to inefficient trade in
the water market, hinders efficient on-farm investment in sunk complementary assets
and leads to inefficient network rationalisation decisions. Instead, the revenue stream
of irrigation operators should be insulated from water trade decisions, through high
termination fees, tying irrigation charges to the land, or tagging the obligation to pay
delivery charges to the new owner of the traded water.
AU  - Biggar, Darryl
DA  - 2010
DA  - 2010
DO  - 10.22004/ag.econ.162023
DO  - doi
EP  - 435
EP  - 421
ID  - 162023
IS  - 4
JF  - Australian Journal of Agricultural and Resource Economics
KW  - Agricultural Finance
KW  - Resource/Energy Economics and Policy
KW  - exit fees
KW  - irrigation infrastructure charges
KW  - sunk complementary investments
KW  - termination fees
L1  - https://ageconsearch.umn.edu/record/162023/files/j.1467-8489.2010.00506.x.pdf
L2  - https://ageconsearch.umn.edu/record/162023/files/j.1467-8489.2010.00506.x.pdf
L4  - https://ageconsearch.umn.edu/record/162023/files/j.1467-8489.2010.00506.x.pdf
LA  - eng
LA  - English
LK  - https://ageconsearch.umn.edu/record/162023/files/j.1467-8489.2010.00506.x.pdf
N2  - It has long been recognised that the mechanism for funding irrigation infrastructure
in Australia may be incompatible with efficient trade in the rural water market. If
the revenue received by an irrigation operator is dependent on the volume of water
entitlements held in the operator’s region, out-of-region permanent water sales
threaten the operator’s revenue stream, potentially leading to higher charges on
remaining irrigators, encouraging an inefficient ‘rush for the exit’. In response,
irrigation operators have imposed restrictions on permanent water trade, such as exit
fees and termination fees, to protect their revenue stream. Previous economic analysis
has suggested that exit fees, in particular, are a barrier to efficient trade in the water
market and should be abolished. In contrast, this paper argues that allowing irrigators
to cancel their water delivery rights without fees or charges leads to inefficient trade in
the water market, hinders efficient on-farm investment in sunk complementary assets
and leads to inefficient network rationalisation decisions. Instead, the revenue stream
of irrigation operators should be insulated from water trade decisions, through high
termination fees, tying irrigation charges to the land, or tagging the obligation to pay
delivery charges to the new owner of the traded water.
PY  - 2010
PY  - 2010
SP  - 421
T1  - Exit fees and termination fees revisited: funding irrigation infrastructure in a manner compatible with water trade
TI  - Exit fees and termination fees revisited: funding irrigation infrastructure in a manner compatible with water trade
UR  - https://ageconsearch.umn.edu/record/162023/files/j.1467-8489.2010.00506.x.pdf
VL  - 54
Y1  - 2010
T2  - Australian Journal of Agricultural and Resource Economics
ER  -