Assessing direct economic effects of reallocating irrigation water to alternative uses: concepts and an application
Irrigation water reallocations are playing an increasingly important role both in developed and developing countries. With growing urban and environmental water demands, rising cost for the development of new water supplies, and irrigated agriculture usually including the least economically valuable use of water, transfers of irrigation water to alternative uses are increasing. However, such reallocations are often controversial, and it is often questioned whether the benefits resulting from these transactions are large enough to outweigh the associated costs. The study reviews the experience with irrigation water transfers, including the involvement of the World Bank. It then discusses the problems of assessing the direct economic effects of reallocations, with a focus on the foregone direct benefits (FDB) in irrigated agriculture.