Factors influencing farmers’ willingness to participate in water allocation trading. A case study in southern Spain

Abstract

This study aims to uncover the factors that influence farmers’ attitudes towards water allocation trading. In the study, we simulate two water availability scenarios, an average year and a drought year, in a contingent valuation experiment with 241 farmers. A survey was held in the spring of 2012 in the Guadalquivir and Almanzora River Basins. First, we estimated a multinomial logit model to determine the factors that influence farmers to decide to participate in our hypothetical market. We then analysed the structural and socio-economic factors determining the monetary value of traded water using Heckman’s two-step model. Our results indicate that those farmers who are more innovative and have had agricultural training show a higher willingness to participate in water trading. Additionally, low water-supply guarantee and appropriate information about seasonal water availability increase the probability of participation. Higher willingness to pay (WTP) for water is found in horticulture and among farmers who grow citrus and other permanent crops; lower water selling value (WTA) is found in farms with extensive annual crops and traditional olive groves. However, monetary values (WTP/WTA) are strongly dependent on the current cost of irrigation water services. While findings of this research seem to support the idea of diffusion innovation theory, the existence of ethical concerns that might influence farmers’ acceptance of irrigation water markets needs further analysis.