IDEAS home Printed from https://ideas.repec.org/p/cdl/agrebk/qt58n467v5.html

Anticipatory Effects of Regulating the Commons

Author

Listed:
  • Bruno, Ellen Marie
  • Hagerty, Nick

Abstract

We study the regulation of common-pool resources under long implementation horizons. First, we show that future regulation can induce either anticipatory compliance or perverse incentives to accelerate extraction (a "Green Paradox''). Then, we evaluate the early effects of a major groundwater regulation in California that does not yet bind. We assemble new data and compare within pairs of neighboring agencies that face varying restrictions on extraction. Differences in future regulation do not affect measures of water-intensive investments or groundwater extraction today. This lack of anticipatory response in either direction can be explained by time preferences: high private discount rates and/or a long implementation horizon dissipate any anticipatory effects. Common-pool resources under open access face a lower risk of perverse incentives than excludable resources, but private actors still may not comply in advance.

Suggested Citation

  • Bruno, Ellen Marie & Hagerty, Nick, 2023. "Anticipatory Effects of Regulating the Commons," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt58n467v5, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt58n467v5
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/58n467v5.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Steven M. Smith & Krister Andersson & Kelsey C. Cody & Michael Cox & Darren Ficklin, 2017. "Responding to a Groundwater Crisis: The Effects of Self-Imposed Economic Incentives," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(4), pages 985-1023.
    2. Libecap, Gary D & Wiggins, Steven N, 1984. "Contractual Responses to the Common Pool: Prorationing of Crude Oil Production," American Economic Review, American Economic Association, vol. 74(1), pages 87-98, March.
    3. Geoffrey Heal, 1976. "The Relationship Between Price and Extraction Cost for a Resource with a Backstop Technology," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 371-378, Autumn.
    4. Ellen M. Bruno & Katrina K. Jessoe & W. Michael Hanemann, 2024. "The Dynamic Impacts of Pricing Groundwater," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 11(5), pages 1201-1227.
    5. Louis Sears & David Lim & C.-Y. Cynthia Lin Lawell, 2019. "Spatial Groundwater Management: A Dynamic Game Framework and Application to California," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 1-34, January.
    6. Sinn, Hans-Werner, 1982. "Taxation, growth, and resource extraction: A general equilibrium approach," European Economic Review, Elsevier, vol. 19(2), pages 357-386.
    7. Di Maria, Corrado & Lange, Ian & van der Werf, Edwin, 2014. "Should we be worried about the green paradox? Announcement effects of the Acid Rain Program," European Economic Review, Elsevier, vol. 69(C), pages 143-162.
    8. Kyle Butts, 2023. "Geographic difference-in-discontinuities," Applied Economics Letters, Taylor & Francis Journals, vol. 30(5), pages 615-619, March.
    9. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    10. Drysdale, Krystal M. & Hendricks, Nathan P., 2018. "Adaptation to an irrigation water restriction imposed through local governance," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 150-165.
    11. Grant R. McDermott & Kyle C. Meng & Gavin G. McDonald & Christopher J. Costello, 2019. "The blue paradox: Preemptive overfishing in marine reserves," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 116(12), pages 5319-5325, March.
    12. Richard Hornbeck & Pinar Keskin, 2014. "The Historically Evolving Impact of the Ogallala Aquifer: Agricultural Adaptation to Groundwater and Drought," American Economic Journal: Applied Economics, American Economic Association, vol. 6(1), pages 190-219, January.
    13. Derek Lemoine, 2017. "Green Expectations: Current Effects of Anticipated Carbon Pricing," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 499-513, July.
    14. 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.
    15. 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.
    16. 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.
    17. Jesus Arellano‐Gonzalez & Frances C. Moore, 2020. "Intertemporal Arbitrage of Water and Long‐Term Agricultural Investments: Drought, Groundwater Banking, and Perennial Cropping Decisions in California," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(5), pages 1368-1382, October.
    18. David Lobell & Christopher Field, 2011. "California perennial crops in a changing climate," Climatic Change, Springer, vol. 109(1), pages 317-333, December.
    19. 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.
    20. Bruno, Ellen M. & Jessoe, Katrina, 2021. "Missing markets: Evidence on agricultural groundwater demand from volumetric pricing," Journal of Public Economics, Elsevier, vol. 196(C).
    21. Cairns, Robert D., 2014. "The green paradox of the economics of exhaustible resources," Energy Policy, Elsevier, vol. 65(C), pages 78-85.
    22. Veronica Grembi & Tommaso Nannicini & Ugo Troiano, 2016. "Do Fiscal Rules Matter?," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 1-30, July.
    23. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    24. Di Maria, Corrado & Smulders, Sjak & van der Werf, Edwin, 2012. "Absolute abundance and relative scarcity: Environmental policy with implementation lags," Ecological Economics, Elsevier, vol. 74(C), pages 104-119.
    25. Tsur, Yacov & Graham-Tomasi, Theodore, 1991. "The buffer value of groundwater with stochastic surface water supplies," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 201-224, November.
    26. Maya A. Norman & Wolfram Schlenker, 2024. "Empirical Tests of the Green Paradox for Climate Legislation," NBER Working Papers 32405, National Bureau of Economic Research, Inc.
    27. Matias D. Cattaneo & Nicolas Idrobo & Rocio Titiunik, 2019. "A Practical Introduction to Regression Discontinuity Designs: Foundations," Papers 1911.09511, arXiv.org.
    28. John A. List & Michael Margolis & Daniel E. Osgood, 2006. "Is the Endangered Species Act Endangering Species?," NBER Working Papers 12777, National Bureau of Economic Research, Inc.
    29. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Kumar, Praveen & Gupta, Eshita & Somanathan, E., 2026. "Removing rationing: Power consumption and groundwater monitoring in South India," Journal of Environmental Economics and Management, Elsevier, vol. 135(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ellen M. Bruno & Nick Hagerty & Arthur R. Wardle, 2022. "The Political Economy of Groundwater Management: Descriptive Evidence from California," NBER Chapters, in: American Agriculture, Water Resources, and Climate Change, pages 343-365, National Bureau of Economic Research, Inc.
    2. Dietrich Earnhart & Nathan P. Hendricks, 2023. "Adapting to water restrictions: Intensive versus extensive adaptation over time differentiated by water right seniority," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(5), pages 1458-1490, October.
    3. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77, October.
    4. Louis Sears & David Lim & C.-Y. Cynthia Lin Lawell, 2018. "The Economics of Agricultural Groundwater Management Institutions: The Case of California," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(03), pages 1-21, July.
    5. Eric C. Edwards & Nathan P. Hendricks & Gabriel S. Sampson, 2025. "The capitalization of property rights to groundwater," American Journal of Agricultural Economics, John Wiley & Sons, vol. 107(2), pages 390-410, March.
    6. 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.
    7. Hrozencik, Aaron & Perez-Quesada, Gabriela & Donahue, Hannah, 2025. "The development and current challenges of irrigated agriculture in the western U.S," Agricultural Water Management, Elsevier, vol. 315(C).
    8. Lin, Boqiang & Zhao, Hengsong, 2023. "Evaluating current effects of upcoming EU Carbon Border Adjustment Mechanism: Evidence from China's futures market," Energy Policy, Elsevier, vol. 177(C).
    9. Najm, Sarah, 2019. "The green paradox and budgetary institutions," Energy Policy, Elsevier, vol. 133(C).
    10. Bertone Oehninger, Ernst & Lin Lawell, C.-Y. Cynthia, 2021. "Property rights and groundwater management in the High Plains Aquifer," Resource and Energy Economics, Elsevier, vol. 63(C).
    11. 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.
    12. Okullo, Samuel J. & Reynès, Frédéric & Hofkes, Marjan W., 2021. "(Bio-)Fuel mandating and the green paradox," Energy Economics, Elsevier, vol. 95(C).
    13. 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).
    14. van der Werf, Edwin & Di Maria, Corrado, 2012. "Imperfect Environmental Policy and Polluting Emissions: The Green Paradox and Beyond," International Review of Environmental and Resource Economics, now publishers, vol. 6(2), pages 153-194, March.
    15. Godwin Kwabla Ekpe & Anna A. Klis, 2023. "Spillover Effects in Irrigated Agriculture from the Groundwater Commons," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(3), pages 469-507, November.
    16. Corrado Di Maria & Sjak Smulders & Edwin Werf, 2017. "Climate Policy with Tied Hands: Optimal Resource Taxation Under Implementation Lags," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(3), pages 537-551, March.
    17. Ellen M. Bruno & Katrina K. Jessoe & W. Michael Hanemann, 2024. "The Dynamic Impacts of Pricing Groundwater," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 11(5), pages 1201-1227.
    18. Perez-Quesada, Gabriela & Hendricks, Nathan P., 2021. "Lessons from local governance and collective action efforts to manage irrigation withdrawals in Kansas," Agricultural Water Management, Elsevier, vol. 247(C).
    19. Melkani, Aakanksha & Mieno, Taro & Hrozencik, Robert A. & Rimsaite, Renata & Brozovic, Nick & Kakimoto, Shunkei, 2023. "Economic Impact of Groundwater Regulation in Nebraska: A Hedonic Price Analysis," 2023 Annual Meeting, July 23-25, Washington D.C. 335606, Agricultural and Applied Economics Association.
    20. Nathaniel H Merrill & Todd Guilfoos, 2018. "Optimal Groundwater Extraction under Uncertainty and a Spatial Stock Externality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 220-238.

    More about this item

    Keywords

    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:agrebk:qt58n467v5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/dabrkus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.