Does the dynamic adjustment of agricultural water prices drive variation of the agricultural production？

Abstract

Regarding the relationship between value, resources, and environmental issues, how to use the principle of economic leverage to manage the demand for agricultural water resources has received increasing research attention. Yet, due to the complexity of how the water economy is structured and to uncertainty in how setting an agricultural water price will affect water demand responses, it is still unclear how to determine a reasonable way to charge for agricultural water. This study investigates the impact of water prices on regional cropping structure, irrigation water use, and environmental sustainability under different increasing price scenarios, using a positive mathematical programming (PMP) model based on GAMS software. The model was run and calibrated using 427 field survey data from the pilot areas in the Wei River Basin for the 2022 crop year. These pilot areas have been selected for comprehensive reform with regard to agricultural water pricing. Our results show that increasing the agricultural water price leads to the changing of crop planting structure in the study area and to the increase of water price elasticity. Furthermore, when the water price rose 200% and 400%, the pesticide input in site A decreased by 1.71% and 3.40%, respectively, and the fertilizer input in site B decreased by 1.05% and 2.03%, respectively. Therefore, our results support the positive role of implementing water price reform policies in the Wei River Basin, but additional policies are also needed to improve the motivation of farmers to save water.