SIGNIFICANCE OF SUPPLY RESPONSE FOR ESTIMATING AGRICULTURAL COSTS OF SOIL-SALINITY

An economic analysis of the agricultural cost of soil salinity in the Murrumbidgee Irrigation Area in southeast inland Australia is reported . The analysis involved use of a single-year regional linear programmi ng model to predict on-farm supply response to changed salinity condit ions. The sensitivity of the estimated cost to assumed length of the d elay in responding was tested. The present value of the cost under an assumption of immediate response was found to be 63% of that under the preferred assumption of a 10-year average delay in response. The esti mate under an assumption of no farmer response was 4.5 times greater t han under the preferred assumption. This confirms that accounting for on-farm response is required if the economic impact of soil salinity i s to be accurately estimated. Copyright (C) 1996 Published by Elsevier Science Ltd