Estimating irrigators' ability to pay for reclamation water

The reclaimation sets prices based on irrigators ability to for water. In c ontrast to the traditional approach (the farm budget study), this research developes a model of irrigator profit and ability to pay. The shadow price (marginal revenue) of water is shown to measure ability to pay per acre-foo t of water. the model can be estimated econometrically with commonly availa ble, although deficient, data. Using data from thirteen water districts in California, annual, district-level shadow price functions are derived for 1 981-91 and compared to ability-to-pay estimates fom a farm budget study of the districts. (JEL Q15).