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programs. Such conservation programs would provide incentives to the farmers to switch to
crops with less water requirements.
5. Conclusions
This paper develops a model of water resource management to examine the socially
optimal management of groundwater allocation with a land retirement program. The theoretical
model formulates an optimal control problem to determine the socially optimal water use and
land allocations among alternative crops. An optimal control problem of a least-cost land
retirement program that achieves a given level of groundwater stock is also developed to
examine the implications of alternative land retirement programs for achieving the optimal water
allocations. The developed model is empirically applied to the ESPA in southern Idaho.
The results show that the alternative land retirement programs have different impacts on
the farm income, gross social welfare, and water use. Cost-effectiveness of land retirement
programs in meeting water quantity goals can be improved by targeting farmers with the highest
benefit (water use) to cost (expected returns from production) ratios. Alternative programs and
policies that focus on on-farm water conservations instead of idling croplands can also be
developed to achieve water quantity goals. These water conservation programs could focus on
changing cropping and rotation practices in the region so that acreage allocated to crops with
more intensive water requirements decrease. Environmental and natural resource policies are
increasingly relying on the use of land retirement and conversion programs to reduce adverse
impacts of agricultural production practices. These results have important implications for the
design and implementation of alternative land retirement programs for water resource
management. The framework developed in this paper can also be applied to other regions and
water conflicts in the United States.
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