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Abstract

The impact of uncertain salt balances in irrigate fields is assessed with a hydroeconomic model that incorporates the effects of salinity. Uncertainty in two parameters that jointly determine root zone salinity is investigated and the conclusions prove to depend upon the way in which these parameters enter the mass-balance equation for soil salinity. It is shown that water has a risk reducing marginal effect on output when growers are risk averse and, under certain conditions, when they are risk neutral. The effects of prices, water quality, and crop salt sensitivity on the conclusions are analyzed and an empirical example is employed to illustrate the magnitude of the impacts.

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