The Importance of Well Yield in Groundwater Demand Specifications

Taro Mieno, Mani Rouhi Rad, Jordan Suter and R. Aaron Hrozencik

Land Economics, 2021, vol. 97, issue 3, 672-687

Abstract: Implementing effective resource management policies critically depends on accurate estimates of the price elasticity of resource demand. In the case of groundwater, previous research estimating well-level groundwater demand has largely neglected the importance of well yield, which is a physical limit on the rate of groundwater extraction. In this study, we empirically estimate the price elasticity of demand for groundwater using well-level data from Colorado. Our results demonstrate that when well yield is omitted, price elasticity is overestimated. This in turn creates inaccurate predictions of the effect of price-based conservation policies on groundwater use and welfare.

JEL-codes: Q15 Q25 (search for similar items in EconPapers)
Date: 2021
Note: DOI: 10.3368/wple.97.3.030320-0031R1
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:uwp:landec:v:97:y:2021:i:3:p:672-687

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