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The Role of Peer Effects in Natural Resource Appropriation – The Case of Groundwater

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  • Gabriel S Sampson
  • Edward D Perry

Abstract

Spatially mediated peer effects are increasingly recognized as an important driver of technology adoption. In this paper, we isolate the role of peer effects from environmental factors in the acquisition of groundwater rights for agricultural irrigation in Kansas. We find strong evidence of peer effects influencing farmers’ decisions to adopt groundwater irrigation. Using a rich dataset on groundwater rights for the period 1943–2014 and a nearest neighbor peer group definition, we find that one additional neighbor adopting groundwater for irrigation increases groundwater adoption by an average of 0.25 percentage points. We also find that the average marginal effect of one additional peer is reduced by distance and diminishes as the total number of neighbors adopting groundwater increases. Using our model estimates to simulate a counterfactual without peer effects, we find that water rights appropriation stemming from peer effects accounted for about 11 million acre-feet of extraction from the Kansas High Plains Aquifer. This amounts to about three years of typical annual extraction. Our results provide evidence that peer effects can “speed up” resource extraction and can help inform policy makers in designing exploitation control rules.

Suggested Citation

  • Gabriel S Sampson & Edward D Perry, 2019. "The Role of Peer Effects in Natural Resource Appropriation – The Case of Groundwater," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(1), pages 154-171.
    • Handle: RePEc:oup:ajagec:v:101:y:2019:i:1:p:154-171.
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    File URL: http://hdl.handle.net/10.1093/ajae/aay090
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    Citations

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    Cited by:

    1. Linda Steinhübel & Johannes Wegmann & Oliver Mußhoff, 2020. "Digging deep and running dry—the adoption of borewell technology in the face of climate change and urbanization," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 685-706, September.
    2. Rui Zhou & Mingbo Ji & Shaoyang Zhao, 2024. "Does E-Commerce Participation among Farming Households Affect Farmland Abandonment? Evidence from a Large-Scale Survey in China," Land, MDPI, vol. 13(3), pages 1-23, March.
    3. Liu, Haiyan & Brouwer, Roy, 2022. "Incentivizing the future adoption of best management practices on agricultural land to protect water resources: The role of past participation and experiences," Ecological Economics, Elsevier, vol. 196(C).
    4. Zhang, Hepei & Ma, Wanglin & Li, Junpeng & Yang, Wei, 2023. "Can citrus farmers earn more from selling online?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1549-1560.
    5. Deng, Xin & Xu, Dingde & Zeng, Miao & Qi, Yanbin, 2019. "Does Internet use help reduce rural cropland abandonment? Evidence from China," Land Use Policy, Elsevier, vol. 89(C).
    6. Che, Yuyuan & Feng, Hongli & Hennessy, David, 2021. "Assessing Peer Effects and Subsidy Impacts in Technology Adoption: Application to Grazing Management Choices with Farm Survey Data," 2021 Conference, August 17-31, 2021, Virtual 315123, International Association of Agricultural Economists.
    7. Funk, Bryana & Amer, Saud A. & Ward, Frank A., 2023. "Sustainable aquifer management for food security," Agricultural Water Management, Elsevier, vol. 281(C).
    8. Yuying Liu & Ruiling Shi & Yiting Peng & Wei Wang & Xinhong Fu, 2022. "Impacts of Technology Training Provided by Agricultural Cooperatives on Farmers’ Adoption of Biopesticides in China," Agriculture, MDPI, vol. 12(3), pages 1-17, February.
    9. Al-Sudani, Amer & Sampson, Gabriel & Bergtold, Jason S., 2020. "Local irrigation response to ethanol production in the High Plains Aquifer," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304515, Agricultural and Applied Economics Association.
    10. Massfeller, Anna & Storm, Hugo, 2022. "Socio-spatial information sources influencing farmers’ decision to use mechanical weeding in sugar beets," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321154, Agricultural Economics Society - AES.
    11. Tong, Jingyi & Bartalotti, Otavio C. & Zhang, Wendong, 2024. "Institutional Land Ownership and Conservation Practice Adoption in the US Midwest," 2024 Annual Meeting, July 28-30, New Orleans, LA 343808, Agricultural and Applied Economics Association.
    12. Rui Min & Hongxin Yang & Xu Mo & Yanbin Qi & Dingde Xu & Xin Deng, 2022. "Does Institutional Social Insurance Cause the Abandonment of Cultivated Land? Evidence from Rural China," IJERPH, MDPI, vol. 19(3), pages 1-11, January.
    13. Zeng, Miao & Du, Jiang & Zhu, Xiaoyu & Deng, Xin, 2023. "Does internet use drive rural household savings? Evidence from 7825 farmer households in rural China," Finance Research Letters, Elsevier, vol. 57(C).
    14. repec:ags:aaea22:335939 is not listed on IDEAS
    15. Sampson, Gabriel S. & Hendricks, Nathan P. & Taylor, Mykel R., 2019. "Land market valuation of groundwater," Resource and Energy Economics, Elsevier, vol. 58(C).
    16. Alfons Weersink & Murray Fulton, 2020. "Limits to Profit Maximization as a Guide to Behavior Change," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(1), pages 67-79, March.

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