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Groundwater pumping and spatial externalities in agriculture

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  • Pfeiffer, Lisa
  • Lin, C.-Y. Cynthia

Abstract

We investigate the behavior of farmers who share an underground aquifer. In the case where seepage may occur the resource is nonexclusive, giving rise to a spatial externality whereby pumping by one user affects others nearby. Theoretically, these externalities are potentially important causes of welfare loss. Using a unique spatial data set of groundwater users in western Kansas, we are able to empirically measure the physical and behavioral effects of groundwater pumping by neighbors. To address the simultaneity of neighbors' pumping, we use the neighbors' permitted water allocation as an instrument for their pumping. We estimate that 2.5% of the total groundwater extracted each year in western Kansas is over-extraction due to the effects of spatial externalities. Individuals who own multiple wells internalize their own externality by trading off pumping at one well for pumping at another.

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  • 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.
  • Handle: RePEc:eee:jeeman:v:64:y:2012:i:1:p:16-30
    DOI: 10.1016/j.jeem.2012.03.003
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    2. Eric C. Edwards, 2016. "What Lies Beneath? Aquifer Heterogeneity and the Economics of Groundwater Management," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(2), pages 453-491.
    3. Carlos Gómez & C. Pérez-Blanco, 2014. "Simple Myths and Basic Maths About Greening Irrigation," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(12), pages 4035-4044, September.
    4. Xiaoying Liu, Mare Sarr and Timothy Swanson, 2014. "Resistance to the Regulation of Common Resources in Rural Tunisia," Working Papers 414, Economic Research Southern Africa.
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    6. Collie, Samuel, 2015. "Accounting for well capacity in the economic decision making of groundwater users," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205783, Agricultural and Applied Economics Association.
    7. Silva, Felipe & Perrin, Richard K. & Fulginiti, Lilyan E. & Schoengold, Karina, 2017. "The Effects of Irrigation and Climate on the High Plains Aquifer: An econometric analysis of groundwater levels and irrigation behavior," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259183, Agricultural and Applied Economics Association.
    8. Matthew Sanderson & R. Frey, 2015. "Structural impediments to sustainable groundwater management in the High Plains Aquifer of western Kansas," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 32(3), pages 401-417, September.
    9. Suarez, Federico & Fulginiti, Lilyan & Perrin, Richard, 2015. "The Value of Water in Agriculture: The U.S. High Plains Aquifer," 2015 Conference, August 9-14, 2015, Milan, Italy 211644, International Association of Agricultural Economists.
    10. Bhargava, Anil K. & Lybbert, Travis J. & Spielman, David J., 2015. "Public benefits of private technology adoption: The localized spatial externalities of water conservation in eastern Uttar Pradesh:," IFPRI discussion papers 1455, International Food Policy Research Institute (IFPRI).
    11. Li, Haoyang & Zhao, Jinhua, 2016. "Rebound Effect of Irrigation Technologies? The Role of Water Rights," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235966, Agricultural and Applied Economics Association.
    12. Gomez Gomez, Carlos Mario & Perez Blanco, Carlos Dionisio, 2013. "Myths and Maths of Water Efficiency: An Analytical Framework to Assess the Real Outcome of Water Saving Technologies in Irrigation," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158690, Agricultural Economics Society.
    13. Stahn, Hubert & Tomini, Agnes, 2021. "Externality and common-pool resources: The case of artesian aquifers," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    14. 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.
    15. Ellen M. Bruno & Richard J. Sexton, 2020. "The Gains from Agricultural Groundwater Trade and the Potential for Market Power: Theory and Application," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 884-910, May.
    16. Bruno, Ellen & Van Dop Sears, Molly & Hanemann, Michael, 2020. "Groundwater Quality and Crop Choice: Implications for the Cost of Seawater Intrusion," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304340, Agricultural and Applied Economics Association.
    17. Pfeiffer, Lisa & Lin, Cynthia, 2013. "The Effects of Energy Prices on Groundwater Extraction in Agriculture in the High Plains Aquifer," 2014 Allied Social Sciences Association (ASSA) Annual Meeting, January 3-5, 2014, Philadelphia, PA 161890, Agricultural and Applied Economics Association.
    18. 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.
    19. Kovacs, Kent & Popp, Michael & Bryce, Kristofer & West, Grant, 2015. "On-Farm Reservoir Adoption in the Presence of Spatially Explicit Groundwater Use and Recharge," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(1), pages 1-27.
    20. Hrozencik, Robert Aaron & Manning, Dale T., 2016. "Groundwater Management Policy Evaluation with a Spatial-Dynamic Hydro-Economic Modelling Framework," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236116, Agricultural and Applied Economics Association.
    21. Bertone Oehninger, Ernst & Lin Lawell, C.-Y. Cynthia & Sanchirico, James & Springborn, Michael, 2016. "The effects of climate change on groundwater extraction for agriculture and land-use change," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235724, Agricultural and Applied Economics Association.

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