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On the spatial nature of the groundwater pumping externality

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  • Brozovic, Nicholas
  • Sunding, David L.
  • Zilberman, David

Abstract

Most existing economic analyses of optimal groundwater management use single-cell aquifer models, which assume that an aquifer responds uniformly and instantly to groundwater pumping. In this paper, we develop an economic model of groundwater management that explicitly incorporates spatial dynamic groundwater flow equations. Calibration of our model to published economic studies of specific aquifers demonstrates that existing studies generally incorrectly estimate the magnitude of the groundwater pumping externality relative to spatially explicit models. In particular, for large aquifers with surface areas of thousands of square miles, the marginal pumping externality predicted by single-cell models may be orders of magnitude less than that predicted by a spatially explicit model, even at large distances from a pumping well. Conversely, for small aquifers with areas of a few hundred square miles or less, single-cell models reasonably approximate the pumping externality. Application of single-cell models to inappropriate settings may result in misleading policy implications due to understatement of the magnitude and spatial nature of the groundwater externality.

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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 2 (April)
Pages: 154-164

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Handle: RePEc:eee:resene:v:32:y:2010:i:2:p:154-164

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Web page: http://www.elsevier.com/locate/inca/505569

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Keywords: Common property resource Groundwater Dynamic optimization;

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References

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  1. Kim, C. S. & Moore, Michael R. & Hanchar, John J. & Nieswiadomy, Michael, 1989. "A dynamic model of adaptation to resource depletion: theory and an application to groundwater mining," Journal of Environmental Economics and Management, Elsevier, vol. 17(1), pages 66-82, July.
  2. Worthington, Virginia E. & Burt, Oscar R. & Brustkern, Richard L., 1985. "Optimal management of a confined groundwater system," Journal of Environmental Economics and Management, Elsevier, vol. 12(3), pages 229-245, September.
  3. Rubio, Santiago J. & Casino, Begona, 2001. "Competitive versus efficient extraction of a common property resource: The groundwater case," Journal of Economic Dynamics and Control, Elsevier, vol. 25(8), pages 1117-1137, August.
  4. Burness, H. Stuart & Brill, Thomas C., 2001. "The role for policy in common pool groundwater use," Resource and Energy Economics, Elsevier, vol. 23(1), pages 19-40, January.
  5. Karp, Larry, 1992. "Social Welfare in a Common Property Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 353-72, May.
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Citations

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Cited by:
  1. Pfeiffer, Lisa & Lin, C.-Y. Cynthia, 2012. "Groundwater pumping and spatial externalities in agriculture," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 16-30.
  2. repec:hae:wpaper:2012-5 is not listed on IDEAS
  3. Sheetal Sekhri, 2013. "Missing Water: Agricultural Stress and Adaptation Strategies in Response to Groundwater Depletion in India," Virginia Economics Online Papers 406, University of Virginia, Department of Economics.
  4. Skurray, James H. & Roberts, E.J. & Pannell, David J., 2013. "Hydrological challenges to groundwater trading: lessons from south-west Western Australia," Working Papers 161073, University of Western Australia, School of Agricultural and Resource Economics.
  5. Peterson, Jeffrey M. & Saak, Alexander E., 2013. "Spatial externalities in aquifers with varying thickness: Theory and numerical results for the Ogallala aquifer," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150553, Agricultural and Applied Economics Association.
  6. James Roumasset & Christopher Wada, 2012. "The Economics of Groundwater," Working Papers 2012-4, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  7. Zhanga, Hongliang & Antle, John, 2013. "Integrating Spatial Dimension into Jointly Dynamic Groundwater Extraction," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150752, Agricultural and Applied Economics Association.
  8. Guilfoos, Todd & Pape, Andreas D. & Khanna, Neha & Salvage, Karen, 2013. "Groundwater management: The effect of water flows on welfare gains," Ecological Economics, Elsevier, vol. 95(C), pages 31-40.
  9. Skurray, James H. & Pannell, David J., 2013. "Potential approaches to the management of third-party impacts from groundwater transfers: Managing externalities from groundwater trading," Working Papers 161074, University of Western Australia, School of Agricultural and Resource Economics.
  10. James Roumasset & Christopher Wada, 2011. "Ordering Renewables: Groundwater, Recycling, and Desalination," Working Papers 201105, University of Hawaii at Manoa, Department of Economics.
  11. Roumasset, James A. & Wada, Christopher A., 2012. "Ordering the extraction of renewable resources: The case of multiple aquifers," Resource and Energy Economics, Elsevier, vol. 34(1), pages 112-128.
  12. James Roumasset & Christopher Wada, 2014. "Integrated Groundwater Resource Management," Working Papers 201414, University of Hawaii at Manoa, Department of Economics.
  13. Stergios Athanassoglou & Glenn Sheriff & Tobias Siegfried & Woonghee Huh, 2012. "Optimal Mechanisms for Heterogeneous Multi-Cell Aquifers," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 52(2), pages 265-291, June.

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