Evaluation of Price Policy in the Presence of Water Theft

Mathematical programming models of “representative” farms are commonly used to evaluate policies such as input subsidies and output price supports. On canals in India, upstream farmers routinely use more irrigation water than allotted. In such circumstances, the programming model should encompass farmers' locational heterogeneity. Here, a representative watercourse with thirty farms is calibrated to the eight crops, fifteen irrigation turns, yield responses to water, and seepage in Maharashtra. Not only does water “theft” increase the social cost of price policies, but the policies' increased inducement to theft by upstream farmers leaves those downstream with less water and lower incomes. Copyright 1999, Oxford University Press.