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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. This paper demonstrates how spatially explicit aquifer response equations from the water resources engineering literature may be embedded in a general economic framework. Calibration of our theoretical model to published economic studies of specific aquifers demonstrates that, by averaging basin drawdown across the entire resource, existing studies generally understate the magnitude of the groundwater pumping externality relative to spatially explicit models. For the aquifers studied, the drawdown 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. Our results suggest that single-cell models may be appropriate for analyses of the welfare effects of groundwater management policies either in small aquifers or in larger aquifers where average well spacings are tens of miles or more. However, in extensive aquifers where well spacings are on the order of a few miles or less, such as many of those of concern to groundwater managers and policy makers, use of single-cell models 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

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number 21035.

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Date of creation: 2006
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Handle: RePEc:ags:aaea06:21035

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Keywords: Resource /Energy Economics and Policy;

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References

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
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Citations

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Cited by:
  1. Skurray, James H. & Pannell, David J., 2013. "Potential approaches to the management of third-party impacts from groundwater transfers," Working Papers 161074, University of Western Australia, School of Agricultural and Resource Economics.
  2. Stergios Athanassoglou & Glenn Sheriff & Tobias Siegfried & Woonghee Tim Huh, 2011. "Optimal Mechanisms for Heterogeneous Multi-cell Aquifers," Working Papers 2011.28, Fondazione Eni Enrico Mattei.
  3. James Roumasset & Christopher Wada, 2012. "The Economics of Groundwater," Working Papers 201211, University of Hawaii at Manoa, Department of Economics.
  4. 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.
  5. 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.
  6. James Roumasset & Christopher Wada, 2014. "Integrated Groundwater Resource Management," Working Papers 201414, University of Hawaii at Manoa, Department of Economics.
  7. 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.
  8. 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.
  9. James Roumasset & Christopher Wada, 2011. "Ordering Renewables: Groundwater, Recycling, and Desalination," Working Papers 201105, University of Hawaii at Manoa, Department of Economics.
  10. 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.
  11. repec:hae:wpaper:2012-5 is not listed on IDEAS
  12. 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.
  13. 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.

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