Adapting to water restrictions: Intensive versus extensive adaptation over time differentiated by water right seniority

This study explores farmers' adjustments to their water use when faced with water restrictions, distinguishing between intensive and extensive adjustments and examining adaptation over time. Specifically, the study uses a difference‐in‐differences framework to explore the effect of a groundwater restriction on irrigation management strategies. In 1992, the Kansas Department of Agriculture created an Intensive Groundwater Use Control Area to improve streamflow in Walnut Creek, which feeds water to a highly important migration point on the mid‐continent flyway. The program allocates permission to extract groundwater in 5‐year allotments. The stringency of the program's restriction depends on the seniority of the water right. We find significant reductions in water use along the intensive margin for senior water rights and along both the intensive and extensive margins for junior water rights. The results indicate significant reductions in water use that imply negative welfare impacts on farmers. We also find evidence of dynamically optimal behavior within each 5‐year allotment period.