Are We Consuming Too Much Groundwater?

Brian Greaney, Joseph Shapiro and Katherine R.H. Wagner

No 35904, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the optimality of human groundwater extraction from many of the world's 3,400 aquifers, where institutional or market failures may produce non-optimal extraction decisions. We use remote sensing and economic data to estimate a dynamic model of water extraction for each aquifer, recover the discount factor that rationalizes observed groundwater extraction, and compare it against Ramsey and market benchmarks. Three- to four-fifths of aquifers are extracted more rapidly than is optimal, decreasing aquifer present value by several percent, and creating trillions of dollars in present value welfare losses. Policies that guarantee users constant water quantities indefinitely, through subsidies or prior appropriation, or policy rules that fully discount future extraction, generate larger welfare costs. A sustainable extraction path that maintains current fill forever generates meaningfully lower welfare than the optimal extraction path, because most aquifer stocks are already inefficiently low.

JEL-codes: H23 Q25 Q50 R30 R52 (search for similar items in EconPapers)
Date: 2026-10
New Economics Papers: this item is included in nep-reg
Note: EEE EFG PE
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w35904.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
Working Paper: Are We Consuming Too Much Groundwater? (2026)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:35904

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w35904
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().