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Do Water Markets Drive Ownership Consolidation? Evidence from California’s Mojave Desert

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  • Ayres, Andrew B.
  • Bruno, Ellen M.

Abstract

Concerns about ownership consolidation and sectoral reallocation resulting from the privatization and trade of water are predominant barriers that inhibit the adoption of water markets. However, systematic empirical evaluation of these processes is lacking. We study trends in ownership shares and trading behavior in one of the world’s largest and most liquid groundwater markets, located in California’s Mojave Desert. Adoption of volumetric property rights allowed for trading to begin in the mid 1990s. Previous open-access water use and the initial allocation were both highly unequal, with the top 10% of water rights holders extracting more than half of pumpable water. We document that trading in the Mojave market over the course of 25 years mildly increased ownership consolidation and that top ownership shares were influenced by differential application of pumping ramp-down policies designed to achieve long-term sustainability. A few public water supply systems dominate the top ownership shares, but a test for market power finds no evidence of anti-competitive behavior. We find that those who sold out of the market completely were on average smaller agricultural users, but that they received payouts thatwere not statistically different from price received by those remaining in the market.

Suggested Citation

  • Ayres, Andrew B. & Bruno, Ellen M., 2025. "Do Water Markets Drive Ownership Consolidation? Evidence from California’s Mojave Desert," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 360733, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:360733
    DOI: 10.22004/ag.econ.360733
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