Three essays on the economics of water management in agriculture

This dissertation presents three essays on the economics of water management in agriculture. The overarching objective of the dissertation is to explore the effects of institutional setting and biophysical complexity on individual decisions around water use as an input. The focus of the dissertation is on agricultural systems that use groundwater as a source of irrigation. The first essay is an empirical study of the role of trading ratios and search frictions in a groundwater market with spatial externalities. Econometric results suggest that the use of trading ratios can indeed provide incentives for market participants to reallocate resources in a way that reduces spatial externalities. In the localized informal market I study, search frictions can be significant, with estimated loss of efficiency of up to 40%. In the second essay, I develop an analytical framework to explore policy implications of limitations imposed on groundwater flow rates by underlying aquifer characteristics. I find that limitations on the instantaneous supply of groundwater can affect irrigation decisions nonlinearly with a threshold effect. A profit-maximizing farmer with maximum available water flow rate below the threshold adjusts irrigation decisions on both the extensive (inter-seasonal) and intensive (intra-seasonal) margins. Above the threshold, optimally only intensive margin adjustment occurs. I further explore the role of heterogeneity in aquifer characteristics on the effectiveness of different aquifer management policies for Chase County, Nebraska, using a numerical model. I find that under conditions of heterogenous instantaneous water availability, the burden of different policies may fall on different groups of water users in ways that have not been previously described. This result suggests that policy makers may need to consider the distributional effects of water management policies as well as their cost effectiveness. Finally, in the third essay, I analyze the effects of groundwater depletion on the loss of buffer value of an aquifer. The chapter develops a framework that captures nonlinearities in the effect of aquifer levels on the instantaneous supply of groundwater as well as the intra-seasonal nature of irrigation decisions. Applying the methodology to a portion of the High Plains Aquifer, I find that the costs of aquifer depletion may be greater than previously considered. Specifically, I show that loss of profit due to the inability to use groundwater to buffer against intra-seasonal variations of weather can be an order of magnitude higher than the loss of profit due to increased pumping costs. I also find that changes in aquifer levels have had quite different effects on buffer values across the area considered. The results suggest that while, on average, benefits to aquifer management in a given area may be small, there may be localized regions with large benefits

An Introduction to Consumptive Use of Water in South Carolina

Effective water resource management requires understanding the supply of and the demand for water. In South Carolina, as in other places, water demand is often determined using total withdrawal volumes. However, the volume of water that is withdrawn can be significantly different from the volume that is actually consumed, which becomes unavailable for downstream uses. Water used for energy generation is commonly excluded from evaluations of total withdrawal volume because it is often assumed to be no or low consumptive use, meaning much of the withdrawn water is returned to the source and remains available for downstream uses. Additionally, energy production withdrawal volumes may be significantly higher than other sectors’ usage and make it difficult to further compare water use of other sectors. Consumptive use volumes are not readily available for South Carolina and can be challenging to determine. However, estimates of consumptive use could allow more meaningful comparisons between water use sectors’ impacts. The objective of this short communication is to briefly discuss data sources, outline two relatively simple methods for calculating consumptive use with available data, identify challenges and opportunities for additional research, and provide preliminary estimates of consumptive water use volumes per water use sectors in South Carolina. Expanded discussion of consumptive water use of thermoelectric energy generation is included due to the significant total water withdrawals and unique challenges with calculating consumptive use of this sector. These results inform water resource planning and identify additional research opportunities

Stakeholder Voice in Water Resource Planning

Stakeholder engagement for natural resource management at the state and local levels has become an important governance practice. This study examines the association of individual traits (aggressive communication, comfort with technology, and argumentativeness) with stakeholder participant voice in a water basin planning virtual meeting setting. Individual participants of the Edisto River Basin Council (RBC) meetings are the subject of the study. South Carolina decentralized water planning to the river basin level, creating RBCs and appointing interested and relevant stakeholders as members. While the river basin planning process did not envisage virtual (Zoom) meetings for the regular meetings of the RBC, the COVID pandemic required this to begin the planning process. Moreover, meeting participants possess diverse interests, powers, and individual traits that may affect the use of voice and engagement. There is well-established literature on stakeholder participation in resource planning. However, there are gaps in the literature regarding use of voice in virtual meeting settings in water resources planning, especially in settings like water-abundant areas in the Southeastern United States. Using the Edisto RBC as a pilot basin and quantitative surveys, preliminary results found that while RBC participants were on average comfortable with technology, they generally avoided conflict, they exhibited average communication apprehension in a meeting environment, and virtual meetings appear to limit participant’s use of voice. Consequently, meeting planners must recognize that not all participants express themselves optimally in virtual meeting settings. In this vein, planners must work to develop opportunities for as much active engagement and sharing as possible

Replication Data for: Policy Leakage or Policy Benefit? Spatial Spillovers from Conservation Policies in Common Property Resources

This repository includes code and replication data for the JAERE publication. Raw data for multiple sources of data are included here. Annual water use data from WIMAS (http://www.kgs.ku.edu/HighPlains/data/), saturated thickness data from Haacker et al. (https://ngwa.onlinelibrary.wiley.com/doi/abs/10.1111/gwat.12350), Hydraulic conductivity and specific yield from USGS. The regressions_code.R script includes the code for the regression tables and figures, while the full_code_rmarkdown.Rmd script will run the entire code, including data cleaning, and generate a pdf document with regression tables and figures

Water Withdrawal Regulation in South Carolina

Water use and reporting regulations in South Carolina have gone through substantial changes over time. Current regulations contain permitting, registration, and reporting requirements for significant water withdrawals throughout the state. The relevant regulations vary across sectors and across different sources of water, i.e., surface water and groundwater withdrawals. Understanding how water use is regulated and reported will contribute to the sustainable management of water supplies into the future

Replication Data for: Complementarity (Not Substitution) Between Natural and Produced Capital: Evidence from the Panama Canal Expansion

This dataset provides input data for generating regression data used in the paper, regression data, data cleaning code, and STATA and R codes for regression tables and figures presented in the manuscript

Water Withdrawal Amounts in South Carolina

Access to plentiful clean water is critical to life and for economic activity. Understanding how water is used and how much water is withdrawn from various sources will help sustainably manage water supplies into the future. Water is commonly used in SC for drinking water; irrigation of crops and golf courses; production of electricity; manufacturing, mining, recreation; and support of aquatic ecosystems. By a significant margin, South Carolina’s largest withdrawal of water is for energy production and overall, water users throughout the state rely heavily on surface water sources

Implications of Search Frictions for Tradeable Permit Markets

This study develops a framework of search with frictions in the context of tradeable permit markets to explain the trading behavior and search effort of the participants. The study area is the groundwater market of the Twin Platte Natural Resources District, in Nebraska. The results show that overall the market is moving towards Pareto efficiency as irrigation rights are moving from lower value users to higher value users. The results also suggest that quantity of the rights traded affects the search effort of the participants positively