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Abstract Climate change is expected to increase the scarcity and variability of fresh water supplies in some regions with important implications for irrigated agriculture. By allowing for increased flexibility in response to scarcity and by incentivizing the allocation of water to higher value use, markets can play an important role in limiting the economic losses associated with droughts. Using data on water demand, the seniority of water rights, county agricultural reports, high-resolution data on cropping patterns, and agronomic estimates of crop water requirements, we estimate the benefits of market-based allocations of surface water for California’s Central Valley. Specifically, we estimate the value of irrigation water and compare the agricultural costs of water shortages under the existing legal framework and under an alternate system that allows for trading of water. We find that a more efficient allocation of curtailments could reduce the costs of water shortages by as much as $362 million dollars per year or 4.4% of the net agricultural revenue in California in expectation, implying that institutional and market reform may offer important opportunities for adaptation.
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The capitalization of property rights to groundwater
Abstract There is limited empirical evidence on the value of formal property rights to natural resources when they are not transferable, and there is regulatory uncertainty about enforcement. This paper takes a hedonic approach to understanding how three core features of groundwater property rights—access, allocation, and seniority—are capitalized into agricultural land values in the High Plains Aquifer region of Kansas. We find that groundwater access rights confer an average land value premium of 71%, or $1445/acre in 2019 dollars. Water rights having larger allocations and more seniority are more highly valued in the land market. The seniority effect is small but is consistent with more junior rights facing greater regulatory risk of curtailment. Taken together, these results suggest that the land market capitalizes constraints to groundwater pumping provided by groundwater property rights. We use our empirical estimates to quantify the distributional costs of modifying existing patterns of pumping, a common challenge of groundwater management organizations seeking to improve the sustainability of extraction.
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- Award ID(s):
- 2316295
- PAR ID:
- 10542274
- Publisher / Repository:
- Wiley-Blackwell
- Date Published:
- Journal Name:
- American Journal of Agricultural Economics
- ISSN:
- 0002-9092
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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