The impact of water price uncertainty on the adoption of precision irrigation systems

Karina Schoengold, David L. Sunding

Research output: Contribution to journalArticlepeer-review

19 Scopus citations

Abstract

We examine whether a firm is more or less likely to adopt precision technology when input prices are stochastic. The results are important to determining whether programs and contracts that reduce input price uncertainty may deter the adoption of conservation practices. An economic model of the technology adoption decision shows that the net effect of input price risk is ambiguous and depends on several factors including the shutdown effect, the mean price effect, the precision expansion effect, and the risk aversion effect. An empirical implementation of the model relies on data on water price and irrigation technology adoption observed in a California irrigation district over the period 1999-2002. The results show that a stable input price increases the adoption of precision technology, but the impact depends on crop choice and land quality characteristics.

Original languageEnglish (US)
Pages (from-to)729-743
Number of pages15
JournalAgricultural Economics (United Kingdom)
Volume45
Issue number6
DOIs
StatePublished - Nov 1 2014

Keywords

  • Input price risk
  • Irrigation
  • Matching estimators
  • Technology adoption

ASJC Scopus subject areas

  • Agronomy and Crop Science
  • Economics and Econometrics

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