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Stopping the Drain: Third-Party Responses to California's Water Market

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  • Ellen Hanak

Abstract

Since the early 1990s, concerns over potential adverse effects of a state-sponsored water market have prompted many rural California counties to adopt ordinances restricting groundwater exports. Results from panel regressions that rely on original water market and institutional data indicate that these local restrictions have significantly reduced water exports. The optimality of this policy is assessed. In the presence of a water market, export restrictions appear to be a low-cost management alternative to common property within source regions. The substantial statewide benefits of a market weigh in favor of broader public support to more comprehensive, non-discriminatory groundwater management initiatives.

Suggested Citation

  • Ellen Hanak, 2004. "Stopping the Drain: Third-Party Responses to California's Water Market," PPIC Working Papers 2004.11, Public Policy Institute of California.
    • Handle: RePEc:ppi:ppicwp:2004.11
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    References listed on IDEAS

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    1. Marca Weinberg & Catherine L. Kling & James E. Wilen, 1993. "Water Markets and Water Quality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(2), pages 278-291.
    2. Howitt, Richard E., 1994. "Empirical analysis of water market institutions: The 1991 California water market," Resource and Energy Economics, Elsevier, vol. 16(4), pages 357-371, November.
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    6. Charles W. Howe & Jeffrey K. Lazo & Kenneth R. Weber, 1990. "The Economic Impacts of Agriculture-to-Urban Water Transfers on the Area of Origin: A Case Study of the Arkansas River Valley in Colorado," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(5), pages 1200-1204.
    7. Marca Weinberg, 1997. "Federal Water Policy Reform: Implications For Irrigated Farms In California," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 63-73, April.
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    Cited by:

    1. Charles F. Mason & Lucija A. Muehlenbachs & Sheila M. Olmstead, 2015. "The Economics of Shale Gas Development," Annual Review of Resource Economics, Annual Reviews, vol. 7(1), pages 269-289, October.
    2. Mark T. Kanazawa, 2019. "Transaction Costs in Water Transfers: The issue of local control," Working Papers 2019-01, Carleton College, Department of Economics.
    3. Andrew Hodges & Kristiana Hansen & Donald McLeod, 2014. "The Economics of Bulk Water Transport in Southern California," Resources, MDPI, vol. 3(4), pages 1-18, December.
    4. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    5. Heaney, Anna & Dwyer, Gavan & Beare, Stephen & Peterson, Deborah C. & Pechey, Lili, 2005. "Third-party effects of water trading and potential policy responses," Conference Workshop Proceedings 31907, Productivity Commission.
    6. Chaudhry, Anita M. & Fairbanks, Dean H.K. & Caldwell, Alyssa, 2015. "Determinants of Water Sales During Droughts: Evidence from Rice Farm-Level Data in California," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205446, Agricultural and Applied Economics Association.
    7. Heaney, Anna & Dwyer, Gavan & Beare, Stephen & Peterson, Deborah C. & Pechey, Lili, 2006. "Third-party effects of water trading and potential policy responses," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 1-17, September.

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    More about this item

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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