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Changes In Water Allocation Mechanisms For California Agriculture

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  • DAVID ZILBERMAN
  • NEAL MACDOUGALL
  • FARHED SHAH

Abstract

Existing institutions allocating water in California reflect prior appropriation water rights established when water was abundant. These allocation rules queue users and do not encourage water conservation. Increased water scarcity and growing valuation of water's environmental benefits are inducing a transition to water allocation mechanisms that increase water efficiency in agriculture. Transferable rights systems will lead to market‐like water allocation, induce farmers to adopt water conservation technology, and may not face strong objection from senior water rights holders. One must weigh the efficiency gains associated with transition from water rights to water markets against the transaction costs associated with installing facilities that enable water exchange and trading. Transition to water markets may preserve the agricultural sector's well‐being while allowing the transfer of some water outside of agriculture—in particular, for environmental benefit. The cost of policies proposed to reduce agricultural water supply while encouraging water trading are inversely related to the extent of trading allowed. The more farmers trade water, the less costly reducing water supply is to agriculture. Policies reducing water supply to Central Valley Project contractors and allowing trading only among these contractors are much more expensive than are policies encouraging trading among all agricultural water users in California.

Suggested Citation

  • David Zilberman & Neal Macdougall & Farhed Shah, 1994. "Changes In Water Allocation Mechanisms For California Agriculture," Contemporary Economic Policy, Western Economic Association International, vol. 12(1), pages 122-133, January.
    • Handle: RePEc:bla:coecpo:v:12:y:1994:i:1:p:122-133
    DOI: 10.1111/j.1465-7287.1994.tb00418.x
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    File URL: https://doi.org/10.1111/j.1465-7287.1994.tb00418.x
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    References listed on IDEAS

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    1. Burness, H Stuart & Quirk, James P, 1979. "Appropriative Water Rights and the Efficient Allocation of Resources," American Economic Review, American Economic Association, vol. 69(1), pages 25-37, March.
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    Cited by:

    1. Umetsu, Chieko & Chakravorty, Ujjayant, 1998. "Water conveyance, return flows and technology choice," Agricultural Economics, Blackwell, vol. 19(1-2), pages 181-191, September.
    2. Phoebe Koundouri, 2004. "Current Issues in the Economics of Groundwater Resource Management," Journal of Economic Surveys, Wiley Blackwell, vol. 18(5), pages 703-740, December.
    3. Bekchanov, Maksud & Bhaduri, Anik & Ringler, Claudia, 2013. "How market-based water allocation can improve water use efficiency in the Aral Sea basin?," Discussion Papers 155504, University of Bonn, Center for Development Research (ZEF).
    4. Gohar, Abdelaziz A. & Ward, Frank A., 2010. "Gains from expanded irrigation water trading in Egypt: An integrated basin approach," Ecological Economics, Elsevier, vol. 69(12), pages 2535-2548, October.
    5. Hellegers, Petra & Zilberman, David & van Ierland, Ekko, 2001. "Dynamics of agricultural groundwater extraction," Ecological Economics, Elsevier, vol. 37(2), pages 303-311, May.
    6. Chokri Dridi & Madhu Khanna, 2005. "Irrigation Technology Adoption and Gains from Water Trading under Asymmetric Information," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 289-301.
    7. Henry Thompson, 2013. "Resource Rights and Markets in a General Equilibrium Model of Production," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 56(1), pages 131-139, September.
    8. Unknown, 2006. "Despite Katrina, Overall Food Prices Stable," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-1, September.
    9. Carlos A. Ulibarri & Harry S. Seely & David B. Willis, 1998. "Farm Profitability And Burec Water Subsidies: An Lp Look At A Region," Contemporary Economic Policy, Western Economic Association International, vol. 16(4), pages 442-451, October.
    10. repec:ags:ubzefd:148054 is not listed on IDEAS
    11. Chakravorty, Ujjayant & Umetsu, Chieko, 2003. "Basinwide water management: a spatial model," Journal of Environmental Economics and Management, Elsevier, vol. 45(1), pages 1-23, January.
    12. Bekchanov, Maksud & Bhaduri, Anik & Ringler, Claudia, 2015. "Potential gains from water rights trading in the Aral Sea Basin," Agricultural Water Management, Elsevier, vol. 152(C), pages 41-56.
    13. Richard J. Mccann, 1996. "Environmental Commodities Markets: ‘Messy’ Versus ‘Ideal’ Worlds," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 85-97, July.
    14. Marshall, Elizabeth P. & Weinberg, Marca, 2012. "Baselines in Environmental Markets: Tradeoffs Between Cost and Additionality," Economic Brief 138922, United States Department of Agriculture, Economic Research Service.

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