Are the gains from a groundwater management policy so low?
The point of departure of this work is Gisser and Sanchez' (1980) result according to which a groundwater management policy would not generate significant gains with respect to a situation with no control. The theoretical result is obviously checked for a fixed number of agents if the storage capacity of the aquifer is relatively large. We propose to add an entry component into Rubio and Casino's (2001) adaptation from Gisser and Sanchez' (1980) seminal model in order to make the number of farmers exploiting the resource endogenous. We then show that, at the steady state, the Gisser and Sanchez' result is not true anymore since the rent at the stationary equilibrium is zero, although it is positive if a central planner intervenes.
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"Dynamic adaptation to resource scarcity and backstop availability: theory and application to groundwater ,"
Australian Journal of Agricultural and Resource Economics,
Australian Agricultural and Resource Economics Society, vol. 50(2), pages 227-245, 06.
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