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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.

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  • 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

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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. Soumya Balasubramanya & Nicholas Brozović & Ram Fishman & Sharachchandra Lele & Jinxia Wang, 2022. "Managing irrigation under increasing water scarcity," Agricultural Economics, International Association of Agricultural Economists, vol. 53(6), pages 976-984, November.
    3. Mai, Thanh & Mushtaq, Shahbaz & Loch, Adam & Reardon-Smith, K. & An-Vo, Duc-Anh, 2019. "A systems thinking approach to water trade: Finding leverage for sustainable development," Land Use Policy, Elsevier, vol. 82(C), pages 595-608.
    4. 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.
    5. Bellanger, Manuel & Fonner, Robert & Holland, Daniel S. & Libecap, Gary D. & Lipton, Douglas W. & Scemama, Pierre & Speir, Cameron & Thébaud, Olivier, 2021. "Cross-sectoral externalities related to natural resources and ecosystem services," Ecological Economics, Elsevier, vol. 184(C).
    6. Bajaj, Akshi & Singh, S.P. & Nayak, Diptimayee, 2022. "Impact of water markets on equity and efficiency in irrigation water use: A systematic review and meta-analysis," Agricultural Water Management, Elsevier, vol. 259(C).
    7. 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.
    8. Skurray, James H. & Roberts, E.J. & Pannell, David J., 2013. "Hydrological challenges to groundwater trading: lessons from south-west Western Australia," Working Papers 161073, University of Western Australia, School of Agricultural and Resource Economics.

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    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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