Supply uncertainty and the economic value of irrigation water

The economic value of irrigation water to horticultural producers in southern Spain is examined using a choice experiment. Marginal water values are found to be typically above those currently paid and to increase with holding size. Potential gains from trade are identified but this would entail the transfer of water and production from smaller to larger holdings. Uncertainty in future irrigation water allocations is also examined. We find producers to be strongly risk averse in their preferences towards water allocations, with significant heterogeneity in the valuation of reduced uncertainty regarding future water allocations.