Research Agenda Groundwater Irrigated Agriculture - Comments Welcome

In large-scale agricultural economies such as India and elsewhere, input subsidies and excessive minimum support prices (MSP) are nowadays considered to be prime culprits of environmental degradation of natural resources including freshwater and soils. In such places, it is feared that the currently observed growth of GDP at full throttle is not sustainable. The observable increases in the volatilities of the agricultural production in India may very well be an early indication of structural deficiencies rather than cyclical variability. Hence, a crucial research task is to identify a mix of public policy interventions together with private sector involvement that can address such problems by conforming to criteria of efficiency and equitability while at the same time accounting for sustainability constraints.

The relevance of efficiency, equitability and sustainability benchmarks to be accounted for cannot be overemphasized. First, there is plenty to be gained from efficiency increases. In India, for example, wheat yields obtained in research farms show the potential for per hectare productivity gains of 25 to 50 percent relative to present levels. Certainly, ongoing degradation of natural resources, declining public investments and only modest growths in private investments as well as suboptimal factor inputs into agriculture potentially threaten these potential improvements in efficiency. Similarly, well intended agricultural government intervention programs such as public food distribution systems have often shown unanticipated effects. While their primary goal is a noble one, i.e. to redistribute food surpluses to deprived areas, these programs have greatly increased welfare inequitability. In fact, they favored producers in surplus states over consumers with the rise of the marginal support prices relative to both, the costs of production and world market food prices. Finally, dramatic regional aquifer depletion (100 to 150 m drops of groundwater levels in some regions) and soil salinization (20'000 to 30'000 ha lost to water logging and soil salinization annually) is observed in India. If growth relies on depletion and degradation of essential production factors, it ultimately cannot be sustained and will turn into the opposite, namely a decline in overall welfare levels.

In the economic discipline, quantitative policy analysis has become a standard tool for the investigation of planned interventions and their effectiveness vis-a-vis the above mentioned benchmarks (e.g. GTAP and its incarnations). Usually, computable general equilibrium models are used to assess effectiveness by comparing ex ante and ex post demand, supply and prices for the markets and commodities under consideration. These models are based on the assumption of myopic, utility maximizing homogeneous economic agents. Their solution normally depends on stringent assumptions about the shape of individual demand and supply functions and on the highly idealized postulation of complete markets. By their nature, these models cannot investigate the transitional dynamics that result from policy interventions. Yet, such dynamics is crucial to account for since it might well be that the attainment of a formulated policy goal comes at a forbiddingly high cost (e.g. depletion of fossil groundwater, extinction of species, etc.) en route to that very goal. XXX Sexy historical example – do we know of one? XXX

Given such deficiencies of existing approaches, we intend to develop a hierarchical production, consumption and trade model of agricultural production. Simply put, our approach will allow to study economic dynamics and dynamic equilibrium outcomes given incomplete information and markets with potentially few participants. In the real-world economy, agricultural production to a large extent is determined by anticipated farmers revenues. These depend on local, regional, national and global market prices as well as governmental support price signals and subsidies policies. Hence our emphasis on a hierarchical approach where macro outcomes are conditional on micro decisions whereas the latter are taken given marco observables. By the explicit integration of spatial and temporal trade and environmental models (physical, stochastic and / or mixed) we aim to represent the place‐dependent dialectic between nature and society as well as the presence or absence of timely economic signals within a quantitative, interdisciplinary framework.