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Can markets improve water allocation in rural America?


  • Jason Henderson
  • Maria Akers


Water, one of the most fundamental resources for economic activity, covers about three-fourths of the earth’s surface--but only 2.5 percent of that amount is considered fresh water. While freshwater supplies in the United States are relatively abundant, increasing demand and drought, especially in the Great Plains, have left some states wondering whether there is enough fresh water to go around. ; The drive for greater efficiency in the use of water has led to the emergence of water markets. These markets allow for the equitable transfer of water rights from lower-value agricultural uses to higher-value uses, such as for emerging industries and growing municipalities. Many rural communities, though, view water markets as a threat to their economic foundation and future growth. ; Henderson and Akers examine how water markets affect both water right holders and their rural communities. They conclude that other mechanisms, in combination with water markets, may be needed to improve the efficiency of water allocation and compensate rural communities for lost economic activity.

Suggested Citation

  • Jason Henderson & Maria Akers, 2008. "Can markets improve water allocation in rural America?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 97-117.
  • Handle: RePEc:fip:fedker:y:2008:i:qiv:p:97-117:n:v.93no.4

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    References listed on IDEAS

    1. Howitt, Richard E. & Hansen, Kristiana, 2005. "The Evolving Western Water Markets," Choices, Agricultural and Applied Economics Association, vol. 20(1).
    2. Jean-Marc Bourgeon & K. William Easter & Rodney B.W. Smith, 2008. "Water Markets and Third-Party Effects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 902-917.
    3. repec:mes:jeciss:v:24:y:1990:i:2:p:463-472 is not listed on IDEAS
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    Cited by:

    1. Cowley, Cortney, 2016. "The Dispersion of Farmland Values in the Tenth District," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 29-67.

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