The Value of Heterogeneous Property Rights: The Costs of Water Volatility
AbstractThe system of prior appropriation in the Western Unites States prioritizes property rights for water based on the establishment of beneficial use, creating a hierarchy where rights initiated first are more secure. I estimate the demand for secure water rights through their capitalization in agricultural property markets using spatially explicit water rights data in the Yakima River Basin, a major watershed in Washington State. The Yakima River watershed, like many Western watersheds, satisfies all water claims during an average year so the benefits of secure water rights stem from protection against water curtailment during drought years. Thus the relative value of secure property rights is a function of water supply volatility because the costs of droughts are predominantly born by those with weak rights. In a hedonic price model I find that farmers pay a premium of 9-12% for more secure water rights. I use Bayesian model averaging to deal with model uncertainty and the potential omitted variable bias prevalent in hedonic analysis. An endogenous change point model tests whether the premium on a senior right varies over time, potentially in response to expectations about climate change. The results fail to confirm that farmers’ expectations about future water supply volatility are manifested in agricultural water markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 149698.
Date of creation: May 2013
Date of revision:
Contact details of provider:
Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
Research Methods/ Statistical Methods; Resource /Energy Economics and Policy;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-24 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oscar R. Burt, 1964. "Optimal Resource Use Over Time with an Application to Ground Water," Management Science, INFORMS, vol. 11(1), pages 80-93, September.
- Markus Goldstein & Christopher Udry, 2008.
"The Profits of Power: Land Rights and Agricultural Investment in Ghana,"
Journal of Political Economy,
University of Chicago Press, vol. 116(6), pages 981-1022, December.
- Markus Goldstein & Christopher Udry, 2005. "The Profits of Power: Land Rights and Agricultural Investment in Ghana," Working Papers 929, Economic Growth Center, Yale University.
- Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Raymond B. Palmquist, 1989. "Land as a Differentiated Factor of Production: A Hedonic Model and Its Implications for Welfare Measurement," Land Economics, University of Wisconsin Press, vol. 65(1), pages 23-28.
- Ragan A. Petrie & Laura O. Taylor, 2007. "Estimating the Value of Water Use Permits: A Hedonic Approach Applied to Farmland in the Southeastern United States," Land Economics, University of Wisconsin Press, vol. 83(3), pages 302-318.
- Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2005. "Will U.S. Agriculture Really Benefit from Global Warming? Accounting for Irrigation in the Hedonic Approach," American Economic Review, American Economic Association, vol. 95(1), pages 395-406, March.
- Diao, Xinshen & Dinar, Ariel & Roe, Terry L. & Tsur, Yacov, 2007.
"A General Equilibrium Analysis Of Conjunctive Ground And Surface Water Use With An Application To Morocco,"
7143, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
- Xinshen Diao & Ariel Dinar & Terry Roe & Yacov Tsur, 2008. "A general equilibrium analysis of conjunctive ground and surface water use with an application to Morocco," Agricultural Economics, International Association of Agricultural Economists, vol. 38(2), pages 117-135, 03.
- Palmquist, Raymond B., 1988. "Welfare measurement for environmental improvements using the hedonic model: The case of nonparametric marginal prices," Journal of Environmental Economics and Management, Elsevier, vol. 15(3), pages 297-312, September.
- Tsur, Yacov & Graham-Tomasi, Theodore, 1991. "The buffer value of groundwater with stochastic surface water supplies," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 201-224, November.
- Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
- repec:reg:rpubli:291 is not listed on IDEAS
- John Faux & Gregory M. Perry, 1999. "Estimating Irrigation Water Value Using Hedonic Price Analysis: A Case Study in Malheur County, Oregon," Land Economics, University of Wisconsin Press, vol. 75(3), pages 440-452.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.