An illiquid market in the desert: estimating the cost of water trade restrictions in northern Chile

Eric Edwards, Oscar Cristi, Gonzalo Edwards and Gary D. Libecap

Environment and Development Economics, 2018, vol. 23, issue 6, 615-634

Abstract: This paper estimates the cost of a policy to restrict water trades to mining firms in northern Chile in order to protect riparian ecosystems and indigenous agriculture. In response to the policy, mining firms have developed high-cost desalination and pumping facilities to secure adequate water supplies. We develop a methodology and estimate the cost of market transactions that fail to occur due to the policy. Lost trade surplus is estimated at US$52 million per year. Without trade restrictions, around 86 per cent of the remaining agricultural water in the region would be transferred to mining.

Date: 2018
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Working Paper: An Illiquid Market in the Desert: Estimating the Cost of Water Trade Restrictions in Northern Chile (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:endeec:v:23:y:2018:i:06:p:615-634_00

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