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Water Markets and Third-Party Effects

Author

Listed:
  • Jean-Marc Bourgeon
  • K. William Easter
  • Rodney B.W. Smith

Abstract

We examine potential third-party effects arising from trading water from one region (rural) to another (urban). Using labor, water and heterogeneous land, rural agents produce a traded agricultural good and nontraded service good. Absent job market frictions, increased water trading improves per capita regional welfare, but aggregate service income can increase (decrease) while individual land rents decrease (increase). If labor experiences job market frictions, water trading can trigger socially inefficient land fallowing, and a decrease in per capita regional welfare. Simulation results confirm the no-job-market-friction model predictions. Copyright 2008, Oxford University Press.

Suggested Citation

  • Jean-Marc Bourgeon & K. William Easter & Rodney B.W. Smith, 2008. "Water Markets and Third-Party Effects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 902-917.
    • Handle: RePEc:oup:ajagec:v:90:y:2008:i:4:p:902-917
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2008.01146.x
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    Cited by:

    1. Maria Akers & Jason Henderson, 2008. "Can markets improve water allocation in rural America?," Economic Review, Federal Reserve Bank of Kansas City, vol. 93(Q IV), pages 97-117.
    2. Marianne LEFEBVRE & Lata GANGADHARAN & Sophie THOYER, 2011. "Do Security-differentiated Water Rights Improve Efficiency?," Working Papers 11-14, LAMETA, Universtiy of Montpellier, revised Jun 2012.
    3. Cuimei Lv & Huiqin Li & Minhua Ling & Xi Guo & Zening Wu & Changkuan Gu & Yang Li, 2021. "An Innovative Emergy Quantification Method for Eco-economic Compensation for Agricultural Water Rights Trading," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 35(3), pages 775-792, February.

    More about this item

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

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