Study On Agricultural Water-saving Technology Compensation Mechanism

Water resource is the most basic means of production of the human survival, productionand life. China is one of the thirteen countries facing the most serious water shortage problemin the world. It has the apparent conflict between water supply and demand. Agriculture is themajor water users in China. The average utilization coefficient of agricultural water is onlyabout0.45, which falls far behind of the developed countries of0.7-0.8. Promotingagricultural water-saving technology to develop agricultural water saving industry is aneffective way to ease the contradiction between supply and demand of agricultural waterresources, ensure food security in China, accelerate the transformation of economicdevelopment, improve the agricultural water efficiency as well as to improve the ability ofagricultural disaster prevention and resilience. Agricultural water-saving is significant withthe feasible technology, and China government also attaches great importance to it. However,the agricultural water-saving technology demand for the terminal users, that is the farmers,can not afford the high cost and express indifferent attitude. Additionally, the irrigationdistrict water management department loss is widespread, resulted in be less able to investlarge sums of money to improve aging disrepair severe and attenuation function of irrigationbackbone projects. And also with the deficit input, they can not renovate the irrigationdistricts. Additionally, water-saving transformation reduces the irrigation water use amount,led to the decline in water revenues of the irrigation area. Then, the department of irrigationwater is also lack of enthusiasm to implement agricultural water-saving technology.Water-saving agriculture is one of the strong social welfare industries. It generates social,ecological and economic benefits, which are equally important. Therefore, a compensationmechanism should be established by institutional innovation means to promote agriculturalwater-saving technology development and coordination between the main body of interests toachieve efficiency and fairness balanced.Considering the actual needs of widespread implementation of agricultural water-savingtechnology nowadays and the research background above, with the economic theory ofexternalities, public goods theory, stakeholder theory and welfare economics and otherdisciplines theory, this work studies the agricultural water-saving technologies compensationmechanism as the research object. Also, the study adopts the detail methods of descriptive statistics, MNL measurement model, game theory, EDM calculation method based on welfareeconomics and the case analysis to analyze the first-hand empirical data. It constructs ananalytical framework with the core contents including the stakeholders’ identification ofagricultural water-saving technologies compensation mechanism, compensation standardestimation of agricultural water-saving technology and the sources of agriculturalwater-saving technology compensation fund. It also points out the willingness and the maininfluencing factors of the agricultural water-saving technology body. And it finally proposessome effective and realistic policy recommendations to establish and improve China’sagricultural water-saving technology compensation mechanism.The conclusions of this study are as follows:Firstly, the substantive issues of agricultural water-saving technologies compensationwith the combination of the compensation theories is analyzed, which could be understoodbelow. Economic externality theory provides two solutions for agricultural water-savingtechnology to internalize the externalities. It includes Pigouvian Theory to form government–based supply and Coase’s Theory to form market-based mechanisms. Different public goodsattributes of agricultural water-saving technologies determine the different production method.Stakeholder theory is useful to identify the role of various stakeholders in the agriculturalwater-saving technology compensation mechanism. EDM method based on welfareeconomics theory theoretically and positively enriches the water-saving technologycompensation standard.Secondly, with the analysis of stakeholder theory, the various stakeholders involved aswell as their detail interests and the role they played in the compensation mechanism can beclear. Government as the public goods provider and the biggest beneficiaries of agriculturalwater-saving should be the primary compensation body. At the same time, game theory isused to analyze the main relationship between the stakeholders of agricultural water-savinggovernance, and the incentive to resolve conflicts of interest is introduced, that is, to establishthe compensation system. In addition, the relevant incentives such as clear agricultural waterrights and establish water markets with the trading of water rights, clear agricultural waterconservation projects property rights and reform agricultural water price should be adopted toimplement agricultural water-saving technology compensation mechanism.Thirdly, on the perspective of agricultural water-saving technology users also as thecompensation object, the farmers’ willingness of using agricultural water-saving technologyand the influencing factors are analyzed. Based on the investigation in the three areasincluding Yanchi, Pingluo and Shapotou of Ningxia Hui Autonomous Region, it is found outthat59%of farmers, the largest share that is145farmers to246farmers are willing to adopt the agricultural water-saving technology, followed by the63farmers who is reluctant to,accounting for26%of the survey sample; the remaining38farmers hold indifferent attitude,accounting for15%. Descriptive statistical analysis and the establishment of the MNLmeasurement model calculate and interpret the significant influencing factors andnon-significant influencing factors. The results indicate that the factors of the age ofhousehold head, the realization of farmers on agricultural water conservation, the satisfactionof water-saving irrigation equipment compensation, soil texture and the way of collectingagricultural water tariff have significant influence on the willingness of farmers to usewater-saving technology. The study points out the methods which are conducive toreorientation of water-saving, including the collection method imposed by water amount,strengthen the compensation of water-saving irrigation equipment and the propaganda ofagricultural water-saving technology to improve farmers’ awareness of saving water as well astaking into account local natural resource endowment to the implementation of the agriculturesection water technology. Therefore, the importance of the establishment the compensationmechanism of agricultural water-saving technology and the inspiration for the compensationpolicy protection of agricultural water-saving technology could be verified.Fourthly, this study introduces classic EDM model based on welfare economics.Comparatively, the current study is not perfect for lacking of comprehensive estimation of theimpact on social welfare which ignored consumer benefit. The Classic EDM modelcalculations indicate agricultural water-saving technology investment increased the producersurplus, consumer surplus, and the overall social surplus. The change of the social welfarecaused by the policy implementation allocates between consumers and producers, the moreimpact will be bear by the less elasticity side. According to the compensation principle of“who benefits and who compensates” and input-output, the welfare distribution of totalsurplus from agricultural water conversation input between producers and consumersdetermines the cost share of agricultural water conversation projects between differentsubjects, also the basic compensation standard. Therefore, consumers should pay the share ofεp/(εp+ηp)to invest in agricultural water-saving technologies, the producers should pay theshare of ηp/(εp+ηp). Besides the compensation standard, a perfect water market built isparticularly important for farms to trade their saved water and increase income, also arousetheir enthusiasm to develop agricultural water conversation.Fifthly, the problem of the sources of compensation funds to adopt agriculturalwater-saving technology is answered, of which mainly from the government, market, social aswell as a combination of the three constitute ways. In detail, it includes the input of publicfinancial money, water-saving capital markets fostered, the investment from market transactions and social construction funds.Sixthly, in order to safeguard the smooth adoption of the compensation mechanism ofagricultural water-saving technology, combined with the foreign experience and domesticsituation, this study proposes the ways including perfect water rights and water markets, andexpand agricultural water-saving investment means, reform the management system of ruralwater conservancy facilities, formulate reasonable water pricing policies, improve agriculturalwater conservation research and promotion mechanisms and establish ‘AgriculturalWater-saving Technologies Compensation Fund’ to promote agricultural water-savingtechnology compensation mechanism.