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SEMINAR: The Interaction of Markets for Temporary and Permanent Water Transfers: An Experimental Analysis

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Today's date is Saturday, March 24, 2018
The Interaction of Markets for Temporary and Permanent Water Transfers: An Experimental Analysis Other events...
Abstract: Growth in water demand across municipal, industrial, and environmental users has resulted in considerable pressure to reallocate water out of agriculture. Water markets, including both markets for water and water rights, have been advocated by many as the vehicle through which this reallocation should occur. Traditionally, due to existing legal and institutional barriers, water rights markets have been the primary mechanism through which water has been reallocated throughout the western United States. Concerns surrounding the permanent dry-up of agricultural land, and the resulting third-party impacts, associated with permanent transfers have led many to advocate for institutional reforms that would allow for temporary transfers of water as an alternative to the permanent transfer of water rights. Despite widespread support for “water markets” as a concept, relatively little is known in terms of how water markets function in different institutional settings. Using data from laboratory markets, we compare efficiency and distributional outcomes of water rights markets with restricted and unrestricted leasing. Findings suggest that while water rights markets (relative to no reallocation) increase efficiency, the introduction of unrestricted leasing on top of active water rights markets does not lead to significant efficiency gains. In our set-up, introducing unrestricted leasing will result in more water use and water right ownership in agriculture (particularly in high-value agriculture), presumably reducing third-party impacts associated with permanent water rights transfers. While overall efficiency is not impacted by the introduction of unrestricted leasing markets, the distribution of profits is. Confirming the concerns of real-world irrigators, we find that prices of water rights are much lower when leasing is introduced, which is not counteracted sufficiently by increased production or leasing revenues, so that overall profits for irrigators are lower. In essence, our experimental results suggest that the cost of “saving” rural agricultural communities could be borne by current irrigators.
Speaker(s) Stephan Kroll, Colorado State University
Location AGRI:G013 | Agriculture Lecture Theatre
Contact Maksym Polyakov <maksym.polyakov@uwa.edu.au> : 08 6488 5509
Start Fri, 16 Mar 2018 11:00
End Fri, 16 Mar 2018 11:55
Submitted by Maksym Polyakov <maksym.polyakov@uwa.edu.au>
Last Updated Tue, 13 Mar 2018 11:53
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