Allocative Inefficiencies Resulting from Subsidies to Agricultural Electricity Use : An Illustrative Model

Strand, Jon

关键词: ADVERSE EFFECTS;    AGRICULTURAL OUTPUT;    AGRICULTURAL PRODUCTION;    AGRICULTURAL WATER;    AGRICULTURE;   

DOI  :  10.1596/1813-9450-5955
RP-ID  :  WPS5955

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper provides an analyticaldiscussion of several interconnected resource allocationproblems from under-pricing of electricity used by farmersfor groundwater extraction.In these situations,groundwater extraction is inefficiently high even withoutelectricity under-pricing. Moreover, part of the electricpower supply intended for farmers is often diverted to otherunauthorized uses (notably illicit consumption). The paperdemonstrates that unless non-price electricity rationingimposes severe constraints on demand, the range of resourceallocation problems includes insufficient incentives toprovide high-level service by the power utility,insufficient incentives for farmers to install and operateefficient equipment, and losses due to political "rentseeking" activities to influence water allocations. Italso shows that diversion of electricity to illicit uses canincrease overall economic efficiency when this leads to lesselectricity use by farmers, thus somewhat ameliorating theproblem of excessive groundwater extraction as well as theinefficiencies related to under-pricing of electricity.Systemic reforms for overcoming these problems may facesevere political obstacles.