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Spatial externalities in aquifers with varying thickness: Theory and numerical results for the Ogallala aquifer

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  • Peterson, Jeffrey M.
  • Saak, Alexander E.

Abstract

This paper studies the divergence in the planning and equilibrium solutions for a multicell aquifer with heterogeneity in cell depths. A spatial model is developed that explicitly accounts for the lateral movement of water between cells. The optimal planning problem maximizes the discounted stream of rents earned from irrigation over an infinite horizon. The optimal steady state of this problem is derived and compared to the competitive equilibrium steady state, which results from myopic rent maximization among users. Studying the steady-state conditions in the two outcomes allows for the nature the spatial externalities to be characterized and reveals the effects of varying cell depths. In a two-cell specification of the model, closed-form expressions are derived for the difference in optimal steady state water table elevations between the two cells. The gap in optimal heights is shown to depend on an interaction between the speed of lateral flows in the aquifer, the asymmetry in cell depths, and the curvature properties of the irrigation benefits function. The 2-cell model is then applied numerically to quantify the spatial externalities and asymmetry effects in Sheridan County, Kansas, which overlies the Ogallala aquifer. Simulated welfare losses in this model are relatively large and are sensitive to the asymmetry in cell depths.

Suggested Citation

  • 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.
    • Handle: RePEc:ags:aaea13:150553
    DOI: 10.22004/ag.econ.150553
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    References listed on IDEAS

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    1. Saak, Alexander E. & Peterson, Jeffrey M., 2007. "Groundwater Pumping by Heterogeneous Users," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9798, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. 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.
    3. Stergios Athanassoglou & Glenn Sheriff & Tobias Siegfried & Woonghee Huh, 2012. "Optimal Mechanisms for Heterogeneous Multi-Cell Aquifers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 52(2), pages 265-291, June.
    4. Saak, Alexander E. & Peterson, Jeffrey M., 2007. "Groundwater use under incomplete information," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 214-228, September.
    5. Jeffrey M. Peterson & Ya Ding, 2005. "Economic Adjustments to Groundwater Depletion in the High Plains: Do Water-Saving Irrigation Systems Save Water?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 147-159.
    6. Brozovic, Nicholas & Sunding, David L. & Zilberman, David, 2010. "On the spatial nature of the groundwater pumping externality," Resource and Energy Economics, Elsevier, vol. 32(2), pages 154-164, April.
    7. Sanchirico, James N. & Wilen, James E., 2005. "Optimal spatial management of renewable resources: matching policy scope to ecosystem scale," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 23-46, July.
    8. Gisser, Micha, 1983. "Groundwater: Focusing on the Real Issue," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 1001-1027, December.
    9. Wang, Chenggang & Segarra, Eduardo, 2011. "The Economics of Commonly Owned Groundwater When User Demand Is Perfectly Inelastic," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(1), pages 1-26, April.
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    Cited by:

    1. Eric C. Edwards & Todd Guilfoos, 2021. "The Economics of Groundwater Governance Institutions across the Globe," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(4), pages 1571-1594, December.
    2. Sinha, Nishita & Black, Michael A., 2020. "Does Self-Monitoring Lead to Better Resource Management? Evidence from Participatory Groundwater Management Program in India," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304634, Agricultural and Applied Economics Association.
    3. 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.
    4. Ayres, Andrew B. & Edwards, Eric C. & Libecap, Gary D., 2018. "How transaction costs obstruct collective action: The case of California's groundwater," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 46-65.
    5. Rouhi Rad, Mani & Brozović, Nicholas & Foster, Timothy & Mieno, Taro, 2020. "Effects of instantaneous groundwater availability on irrigated agriculture and implications for aquifer management," Resource and Energy Economics, Elsevier, vol. 59(C).
    6. Quintana Ashwell, Nicolas E. & Peterson, Jeffrey M. & Hendricks, Nathan P., 2018. "Optimal groundwater management under climate change and technical progress," Resource and Energy Economics, Elsevier, vol. 51(C), pages 67-83.

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