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Stopping The Drain: Third-Party Resistance To Water Marketing In California


  • Hanak, Ellen


Growth of the water market since the early 1990s has generated controversy in California's source regions over two types of transfers - those drawing on native groundwater reserves and those resulting from crop idling. Given incomplete state-level protections for third parties who may suffer adverse effects of water sales, local authorities have responded with their own measures. In particular, many rural counties have adopted ordinances restricting groundwater exports. Some communities have restricted farmers' right to fallow land for the market. Original data on water market flows and local ordinances are used to analyze the impact of county trade restrictions on water sales and water exports. County ordinances have reduced water exports by nearly20 percent and water sales by nearly 15 percent since the mid 1990s and have shifted some exports to local buyers. Several policy options are available for mitigating third-party effects in less trade-restrictive ways. For groundwater protection, a more efficient solution lies in the establishment of local groundwater management systems. Recent test cases will provide useful guidance on the practical difficulties of implementing a transfer tax to compensate communities for the impacts of fallowing.

Suggested Citation

  • Hanak, Ellen, 2003. "Stopping The Drain: Third-Party Resistance To Water Marketing In California," 2003 Annual meeting, July 27-30, Montreal, Canada 22099, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea03:22099

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    References listed on IDEAS

    1. Arellano, Manuel & Honore, Bo, 2001. "Panel data models: some recent developments," Handbook of Econometrics,in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 53, pages 3229-3296 Elsevier.
    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. James J. Murphy & Ariel Dinar & Richard E. Howitt & Erin Mastrangelo & Stephen J. Rassenti & Vernon L. Smith, 2006. "Mechanisms for Addressing Third-Party Impacts Resulting From Voluntary Water Transfers," Chapters,in: Using Experimental Methods in Environmental and Resource Economics, chapter 5 Edward Elgar Publishing.
    4. Provencher Bill & Burt Oscar, 1993. "The Externalities Associated with the Common Property Exploitation of Groundwater," Journal of Environmental Economics and Management, Elsevier, vol. 24(2), pages 139-158, March.
    5. Howitt, Richard E., 1994. "Empirical analysis of water market institutions: The 1991 California water market," Resource and Energy Economics, Elsevier, vol. 16(4), pages 357-371, November.
    6. Daniel Bromley, 1992. "The commons, common property, and environmental policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(1), pages 1-17, January.
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    1. Ghosh, Sanchari & Cobourn, Kelly & Elbakidze, Levan, 2013. "Water Banks, Markets, and Prior Appropriation: A Comparison of Water Allocation Instruments in the Eastern Snake River Plain," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150643, Agricultural and Applied Economics Association.

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