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Water Markets: Australia's Murray-Darling Basin and the US Southwest

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  • R. Quentin Grafton
  • Clay Landry
  • Gary D. Libecap
  • Robert J. O'Brien

Abstract

Fresh water supplies increasingly are under stress in many parts of the world due to rising populations, higher per capita incomes and corresponding consumption, greater environmental concerns, and the effects of climate change. Water rights and markets are part of the institutional menus for responding to these problems. We examine water markets in both Australia's MDB and the western US and their prospects for addressing water scarcity. The two regions share a number of important similarities including: climate variability that requires investment in reservoirs to make water available in low-rainfall periods; the need for internal and cross-border (state) water management; an historical major allocation of water to irrigators; increasing competition among different uses (agricultural, environmental and recreational in situ uses, urban demand); and the potential for water trading to more smoothly and quickly allocate water across these competing uses. A comparison of the two regions provides important insights about how economic factors can encourage more efficient water allocation, market structure and government regulation. We show that rights are more clearly defined and trading more common in Australia than appears to be the case in the western U.S. Longer periods of scarcity and hence, higher water values may explain this difference.

Suggested Citation

  • R. Quentin Grafton & Clay Landry & Gary D. Libecap & Robert J. O'Brien, 2010. "Water Markets: Australia's Murray-Darling Basin and the US Southwest," NBER Working Papers 15797, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15797
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    References listed on IDEAS

    as
    1. Jedidiah Brewer & Gary D. Libecap, 2009. "Property rights and the public trust doctrine in environmental protection and natural resource conservation ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(1), pages 1-17, January.
    2. Johnson, Ronald N & Gisser, Micha, 1981. "The Definition of a Surface Water Right and Transferability," Journal of Law and Economics, University of Chicago Press, vol. 24(2), pages 273-288, October.
    3. Scott, Anthony, 2008. "The Evolution of Resource Property Rights," OUP Catalogue, Oxford University Press, number 9780198286035.
    4. Jedidiah Brewer & Robert Glennon & Alan Ker & Gary Libecap, 2008. "2006 Presidential Address Water Markets In The West: Prices, Trading, And Contractual Forms," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 91-112, April.
    5. Thobani, Mateen, 1997. "Formal Water Markets: Why, When, and How to Introduce Tradable Water Rights," World Bank Research Observer, World Bank Group, vol. 12(2), pages 161-179, August.
    6. Brewer, Jedidiah & Libecap, Gary D., 2009. "Property rights and the public trust doctrine in environmental protection and natural resource conservation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(1), March.
    7. R. Quentin Grafton & Michael B. Ward, 2008. "Prices versus Rationing: Marshallian Surplus and Mandatory Water Restrictions," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages 57-65, September.
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    Cited by:

    1. Quentin Grafton & Clay Landry & Gary Libecap & Sam McGlennon & Bob O'Brien, 2010. "An Integrated Assessment of Water Markets: Australia, Chile, China, South Africa and the USA," Centre for Water Economics, Environment and Policy Papers 1009, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    2. Broadbent, Craig D. & Brookshire, David S. & Coursey, Don & Tidwell, Vince, 2014. "An experimental analysis of water leasing markets focusing on the agricultural sector," Agricultural Water Management, Elsevier, vol. 142(C), pages 88-98.
    3. He, Lixia & Horbulyk, Theodore M. & Ali, Md. Kamar & Le Roy, Danny G. & Klein, K.K., 2012. "Proportional water sharing vs. seniority-based allocation in the Bow River basin of Southern Alberta," Agricultural Water Management, Elsevier, vol. 104(C), pages 21-31.

    More about this item

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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