A micro-simulation model of irrigation farms in the southern Murray-Darling Basin

TL;DR

This paper develops a farm-level irrigation microsimulation model for the southern Murray-Darling Basin using survey data and profit functions to analyze water price impacts, aiming to inform policy and farm management strategies.

Contribution

It introduces a detailed farm-level microsimulation model based on survey data and profit functions to assess water price effects in the Murray-Darling Basin.

Findings

Simulated a 30% water price increase impact on costs, revenue, and profit.

Utilized detailed survey data for model calibration.

Proposed improvements for future model development.

Abstract

This paper presents a farm level irrigation microsimulation model of the southern Murray-Darling Basin. The model leverages detailed ABARES survey data to estimate a series of input demand and output supply equations, derived from a normalised quadratic profit function. The parameters from this estimation are then used to simulate the impact on total cost, revenue and profit of a hypothetical 30 per cent increase in the price of water. The model is still under development, with several potential improvements suggested in the conclusion. This is a working paper, provided for the purpose of receiving feedback on the analytical approach to improve future iterations of the microsimulation model.