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Estimating Agricultural Acreage Responses to Input Prices: Groundwater in California

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  • Stevens, Andrew W.

Abstract

How does agricultural land use respond to variation in the price of agricultural water? Answering this question is difficult in California where there is no well-functioning market for water. To overcome this challenge, I use variation in groundwater depth over space and time to proxy for the price of water. This makes sense in a setting where groundwater pumping is unregulated, meaning the effective price of pumped groundwater is the energy cost to pump it. I construct a panel of agricultural fields in Fresno County, California from 2008 to 2016, and estimate a fixed effects model to estimate groundwater depth's effect on transition probabilities between different categories of land cover. I find that groundwater depth reduces the likelihood that parcels will be planted to an annual crop, but increases the likelihood of fallowing land. Groundwater depth seems to have a less profound effect on choosing to plant perennial crops.
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Suggested Citation

  • Stevens, Andrew W., 2017. "Estimating Agricultural Acreage Responses to Input Prices: Groundwater in California," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258440, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea17:258440
    DOI: 10.22004/ag.econ.258440
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    File URL: http://ageconsearch.umn.edu/record/258440/files/Abstracts_17_05_24_16_02_59_97__136_152_142_54_0.pdf
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    References listed on IDEAS

    as
    1. Dinar, Ariel, 1994. "Impact of energy cost and water resource availability on agriculture and ground water quality in California," Resource and Energy Economics, Elsevier, vol. 16(1), pages 47-66, March.
    2. Steven Buck & Maximilian Auffhammer & David Sunding, 2014. "Land Markets and the Value of Water: Hedonic Analysis Using Repeat Sales of Farmland," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(4), pages 953-969.
    3. David Zilberman & Doug Parker, 1996. "Explaining Irrigation Technology Choices: A Microparameter Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1064-1072.
    4. Karina Schoengold & David L. Sunding, 2014. "The impact of water price uncertainty on the adoption of precision irrigation systems," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 729-743, November.
    5. Margriet F. Caswell & David Zilberman, 1986. "The Effects of Well Depth and Land Quality on the Choice of Irrigation Technology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 798-811.
    6. Nathan P. Hendricks & Aaron Smith & Daniel A. Sumner, 2014. "Crop Supply Dynamics and the Illusion of Partial Adjustment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1469-1491.
    7. Stevens, Andrew, 2015. "Fueling Local Water Pollution: Ethanol Refineries, Land Use, and Nitrate Runoff," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205741, Agricultural and Applied Economics Association.
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    Keywords

    Land Economics/Use; Production Economics; Resource/Energy Economics and Policy;

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