Missing markets: Evidence on agricultural groundwater demand from volumetric pricing

Ellen Bruno and Katrina Jessoe

Journal of Public Economics, 2021, vol. 196, issue C

Abstract: Market-based instruments pose widely prescribed but rarely implemented tools to manage scarce water resources. We estimate the price elasticity of demand for agricultural groundwater in a water district with volumetric pricing and monthly well-level extraction data spanning 17 years. Demand is inelastic, with estimates ranging from −0.16 to −0.2. We apply this parameter to calculate the surplus change from the introduction of agricultural water pricing, and the prospective gains from water transfers between urban and agricultural users, with and without water supply curtailments. Relative to a water conservation mandate applied uniformly to all users, trading can substantially mitigate the costs of water scarcity.

Keywords: Environmental regulation; Market-based approaches; Groundwater; Agriculture; Climate change (search for similar items in EconPapers)
JEL-codes: D47 D61 Q15 Q25 R52 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:196:y:2021:i:c:s0047272721000104

DOI: 10.1016/j.jpubeco.2021.104374

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