Technical and Environmental Efficiency of Water Use in Agriculture

This article proposes a measure of multi-factor water efficiency as an alternative to partial water productivity indicators that are easy to calculate but give an incomplete picture of productivity and efficiency. Technical water efficiency is determined in the production process of desired outputs using a nonparametric, directional distance function that evaluates water efficiency given levels of all other inputs and outputs. Environmental efficiency is evaluated separately using a distance function that finds the minimum level of pollutants for different combinations of polluting inputs. Efficiency of these two production processes are then combined in an overall measure of water efficiency that can be decomposed into a technical efficiency component and an environmental efficiency component. Results of an application to global agriculture show that differences in overall efficiency across countries are mostly explained by differences in environmental efficiency, that improved water efficiency could reduce the total amount of water used for irrigation by 11 percent, while improved environmental efficiency could reduce pollution by 30 percent globally. Even if countries achieve full water efficiency, significant differences in water use and pollution will remain as the result of differences in production technology between countries. Acknowledgement