Formal and informal water markets: Drivers of sustainable rural communities?

This paper analyzes irrigator behavior in formal and informal water markets within an irrigation region of southeastern Australia to identify the extent to which these markets have facilitated the development of sustainable rural communities. The analyses show clear evidence that both the formal and informal markets have assisted irrigators in managing the significant adjustment pressure within the irrigation industry and the increased risk management burden placed on them by changing allocation policies. There is also evidence that many irrigators are active as both buyers and sellers and within both the formal and informal market, shifting their risk position within and between seasons and adjusting the allocation of their capital assets. All of these functions are essential to develop sustainable rural communities and retain community cohesion.