Alternative irrigation water pricing policies: An Econometric Mathematical Programming Model

Abstract

Considering the important role of irrigation in the socio-economic development of the Alentejo region in Portugal, this paper aims to assess the economic impact of water pricing in the context of the public irrigation scheme of Odivelas. The methodological framework uses Positive Mathematical Programming (PMP) and, as an alternative, Econometric Mathematical Programming (EMP) based on the estimation of optimality conditions. The model parameters were estimated using the entropy approach and information priors. The models were formulated on the aggregated scale of the irrigated scheme, considering the main regional irrigated crops as well as land, labour, capital and water resources. The main results lead to the conclusions that EMP model performs better than PMP and that under a twopart tariff approach the block pricing scheme is better than the volumetric pricing scheme.