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Dynamic Land Use in Critically Overdrafted Basins in California

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  • Hauck, Katherine
  • Kishore, Siddharth

Abstract

This paper studies how California’s Sustainable Groundwater Management Act (SGMA) has changed farmland use and farmland values in the Central Valley. We use a spatial regression discontinuity around the perimeter of critically overdrafted (CO) subbasins. We then add a triple-difference layer that uses surface water district membership as a second margin and the year of the Groundwater Sustainability Plan (GSP) filing deadline as the third. The crop-side outcome is the parcel-level share of cropped acres in young perennial plantings, from the Land IQ panel for 2014 and 2016 and 2018 through 2023. The land price outcome is the log real sale price per acre, from Acres Inc. transactions for 2016 through 2023. New young perennial planting in CO basins falls by about 4.4 percentage points in 2022, the first full crop year after CO basin GSPs took effect. The drop persists in 2023. CO basin land prices show no significant discount. We interpret the joint pattern as evidence that regulation reallocates land use before it reallocates land value. The intensive margin (price) absorbs most of the SGMA shock through option value and capitalization of surface water rights, while the extensive margin (planting) bears the visible part of the adjustment.

Suggested Citation

  • Hauck, Katherine & Kishore, Siddharth, 2026. "Dynamic Land Use in Critically Overdrafted Basins in California," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404486, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404486
    DOI: 10.22004/ag.econ.404486
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    References listed on IDEAS

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    4. Sampson, Gabriel S. & Hendricks, Nathan P. & Taylor, Mykel R., 2019. "Land market valuation of groundwater," Resource and Energy Economics, Elsevier, vol. 58(C).
    5. 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.
    6. Andrew B. Ayres & Kyle C. Meng & Andrew J. Plantinga, 2021. "Do Environmental Markets Improve on Open Access? Evidence from California Groundwater Rights," Journal of Political Economy, University of Chicago Press, vol. 129(10), pages 2817-2860.
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