Assessing the Impact of Alternative Water Pricing Schemes on Income Distribution

The reform of water pricing policies may represent an effective instrument for enhancing the efficient use of water resources. However, policy makers fear that a change in the pricing methods may cause income losses of some farmers, and that this income inequality may generate public discontent. The aim of this paper is to compare five pricing methods in order to measure their effects on income distribution. The analysis focuses either in the income distribution among different types of farms, and the income distribution between different social groups (landowners, capitalists and workers). A Crude Monte-Carlo simulation model has been adopted, in order to take account of the effects of commodity prices and rainfall variability, which are among the most relevant key factors affecting farmers‘ income. According to the findings, water pricing schemes do not affect the income distribution among farms types, while a significant impact is exerted on the distribution among social groups, and in particular on the wages of temporary worker