The Impacts of Arable Land per Farmer on Water Markets in China

Yahua Wang,Maosen Xu,Tingju Zhu

doi:10.3390/w12123433

Yahua Wang, Maosen Xu + Show 1 more

Open Access

https://doi.org/10.3390/w12123433

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Abstract

Water trading markets have been introduced in many countries as a means to alleviate water scarcity. However, the performance of water markets varies greatly across different countries, and in only very few countries do they work well. In this study, a two-sector water rights trading model is developed and applied to a case study in China. The results suggest that arable land per farmer is a key factor that affects the performance of water markets in China. This is positively correlated with traded water volume, with the market’s economic efficiency, and with the social welfare the market brings. Although the model simulation ignores other factors, this problem can be solved by selecting a suitable research area. These findings suggest that water markets may be less likely to be effective in countries with small arable land per farmer.

Highlights

Water resources have been overexploited to meet human demand due to economic and social development and urbanization, through digging wells, constructing reservoirs, building water diversion channels to regulate water resources within a river basin or among river basins, and so on [1,2]
This paper focuses on the impact of arable land per farmer (ALPF) on the performance of a water market in China
We use several indexes to measure the impacts of ALPF and transaction cost on the water market, including traded volume and traded value, index of maximum acceptable transaction cost, producer surplus, consumer surplus and total surplus of the water market

Summary

Introduction

Water resources have been overexploited to meet human demand due to economic and social development and urbanization, through digging wells, constructing reservoirs, building water diversion channels to regulate water resources within a river basin or among river basins, and so on [1,2]. Freshwater scarcity is increasingly perceived as a global systemic risk [3]. Among the various approaches to water management, market-based water allocation has become a hot topic [4]. This aims at maximizing the economic efficiency of water use by re-allocating water to where its marginal economic value is highest [5]. Water markets are increasingly proposed as a demand-management strategy to deal with water scarcity [6]. In the United States and Australia, there is strong evidence that market-based water transfers can improve water use efficiency, especially in irrigated agriculture, and make water pricing more efficient. Up to 86% of irrigators in a state in the southern

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Conclusion