Water pricing and water allocation in israel

Marginal valuation of water is complicated because water authorities in most countries do not equate prices across users. Standard analyses imply that unequal valuation of water by users is inefficient and that economic efficiency can be improved by equating prices after accounting for transportation costs. Such inefficiencies are usually explained by the influence of political interest groups. We suggest alternatively that motivations such as food self-sufficiency, ideological settlement objectives, equity, and long run considerations may take precedence over short-run economic efficiency in Israeli water markets. If so, new peace accords, water projects, and water price equalization appear to have important complementary effects when exploited in combination.