The derived demand for irrigation water: a methodological note

Determining an estimate of the elasticity of derived demand for irrigation water is a crucial step in analyzing water policy alternatives for most regions in the West. Previous research indicates that water usage in western agricultural regions is relatively insensitive to changes in water prices. More recently these findings have been challenged on the basis that the modeling approaches that have been employed provide results that are biased toward inelasticity. This paper analyzes the implications of assumptions commonly used in regional models and identifies sources of potential bias. The significance for empirical research is discussed