Water conservation policy analysis: an interregional, multi-output, primal-dual optimization approach

An interregional, multi-output, normalized restricted-equilibrium model of field-crop agriculture is estimated within the context of a multistage, programming-based, system estimation procedure. Implicit, total economic-cost functions endogenize behavioral, opportunity adjustment costs of fixed and allocatable land and water resources. Crop-specific, Marshallian water-demand elasticities are estimated for restricted and unrestricted groundwater substitution environments, and decomposed by water source. Elasticities are inelastic, but water-price policy reform can be an effective water-conservation policy tool when groundwater use is unrestricted. When groundwater use is restricted, effective conservation policy requires more dramatic water-price policy reform.