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Growing societal water demands and decreasing water supplies are straining the water available for communities in many basins. Once water supplies have been fully allocated and developing new water supplies is infeasible, the best option to meet growing water demands is often to reallocate water from rural agricultural water uses. Yet, the dynamics and implications of these rural‐to‐urban water transfers are poorly understood. Here, we integrate an agent‐based model with an input‐output model to capture the behavior of individual irrigators and examine how their water transfer decisions propagate through the broader rural economy and shape social dynamics. As a demonstration of our model, the rural community represents Alamosa County while the city represents the city of Denver, both located in Colorado, Unites States. We find that the greatest long‐term decline in crop water use corresponds with higher city growth rates while the greatest short‐term decline corresponds with larger farmer discount rates. As farmers sell their water rights to the City, economic activity from the crop production sector declines, causing unemployment in the crop production sector to increase and demand from the service sectors to decrease, which results in output declining in these economic sectors as well. Thus, a negative impact on the agricultural sector will cause some negative impact on other economic sectors, such as professional, health care, and recreational services. This research brings new insights that can be used to evaluate the socio‐economic impacts of water transfers and shape policy to minimize potential negative externalities associated with water transfers. 

Economic models and watershed models provide useful results, but when seeking to integrate these systems, the temporal units typically utilized by these models must be reconciled. A hydrologic-economic modeling framework is built to couple the Hydrological Simulation Program-Fortran (HSPF), representing the watershed system, with the Rectangular Choice-of-Technology (RCOT) model, an extension of the basic input-output (I-O) model. This framework is implemented at different sub-annual timesteps to gain insight in selecting temporal units best suited for addressing questions of interest to both economists and hydrologists. Scenarios are designed to examine seasonal increases in nitrogen concentration that occur because of agricultural intensification in Cedar Run Watershed, located in Fauquier County, northern Virginia. These scenarios also evaluate the selection among surface water, groundwater, or a mix of (conjunctive use) practices for irrigation within the crop farming sector in response to these seasonal impacts. When agricultural intensification occurs in Cedar Run Watershed, implementing conjunctive use in irrigation reduces the seasonal increases in nitrogen concentration to specified limits. The most efficient of the conjunctive use strategies explicitly considered varies depending on which timestep is utilized in the scenario: a bi-annual timestep (wet and dry season) vs. a seasonal timestep. This modeling framework captures the interactions between watershed and economic systems at a temporal resolution that expands the range of questions one can address beyond those that can be analyzed using the individual models linked in this framework. 

Economic input-output and watershed models provide useful results, but these kinds of models do not use the same spatial units, which typically limits their integration. A modular hydrologic-economic modeling framework is designed to couple the Rectangular Choice-of-Technology (RCOT) model, a physically constrained, input-output (I-O) model, with the Hydrological Simulation Program-Fortran (HSPF). Integrating these two models can address questions relevant to both economists and hydrologists, beyond addressing only administrative or watershed concerns. This framework is utilized to evaluate alternative future development prospects within Fauquier County, northern Virginia, specifically residential build-up, and agricultural intensification in the upstream location of the local watershed. Scenarios are designed to evaluate the downstream impacts on watershed health caused by upstream development and changes made within the economic sectors in response to these impacts. In the first case, an alternative residential water technology is more efficient than the standard for ensuring adequate water supply downstream. For scenarios involving upstream agricultural intensification, a crop shift from grains to fruits and vegetables is the most efficient of the alternatives considered. This framework captures two-way feedback between watershed and economic systems that expands the types of questions one can address beyond those that can be analyzed using these models individually. 

To capture the interactions between hydrologic and economic systems necessary for modeling water quality at a sufficient level of spatial detail, we have designed a modular framework that couples an economic model with a watershed model. To represent the economic system, the Rectangular Choice-of-Technology (RCOT) model was used because it represents both the physical and monetary aspects of economic activities and, unlike traditional input-output or general equilibrium models, it can optimize choices among operational technologies in addition to the amount and location of production. For the first implementation of this modeling framework, RCOT is coupled with a watershed model, Hydrological Simulation Program-Fortran (HSPF), which was calibrated to represent Cedar Run Watershed in northern Virginia. This framework was used to analyze eight scenarios related to the expansion of agricultural activity in Fauquier County. The database for RCOT used county-level input-output data representative of the region in 2012. Thus, when crop farming was expanded to fully utilize the farmland available in the watershed, the nitrogen concentration at the outflow of the watershed increased from 0.6 to 4.3 mg/L. However, when RCOT could select between a standard and a more nitrogen-efficient management practice, the outflow nitrogen concentration only increased to 2.6 mg/L because RCOT selected the more resource-efficient practice. Building on this modular framework, future work will involve designing more realistic scenarios that can test policy options and regional planning decisions in a wide range of watersheds.