Droughts, Deluges, and (River) Diversions: Valuing Market-Based Water Reallocation

• 成果类型: Article
• 署名作者: Rafey, Will
• 署名单位: University of California System; University of California Los Angeles
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20201434
• 发表日期: 2023
• 页码: 430-471
• 关键词: unsettled problems; TRADE; PRODUCTIVITY; transactions; constraints; EFFICIENCY; scarcity; POWER

摘要

This paper develops and applies a method to value water trading on a river network. The framework relies on regulatory variation in diversion caps to identify production functions for irrigated farms, then uses the estimated shadow values to assess the market's reallocation. I apply this framework to the largest water market in human history, located in southeastern Australia. Observed water trading increased output by 4-6 percent from 2007 to 2015, equivalent to avoiding an 8-12 percent uniform decline in water resources. Reallocation and average surplus both increase substantially during drought, implying that water markets can be most valuable when climatic variability is most severe.