An Illiquid Market in the Desert: Estimating the Cost of Water Trade Restrictions in Northern Chile

43 Pages Posted: 20 Jan 2016

See all articles by Eric C. Edwards

Eric C. Edwards

Utah State University

Oscar Cristi

Universidad del Desarrollo

Gonzalo Edwards

Pontifical Catholic University of Chile - Institute of Economics

Gary D. Libecap

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management; University of Arizona - Karl Eller Center; National Bureau of Economic Research (NBER); PERC - Property and Environment Research Center

Date Written: January 2016

Abstract

This paper estimates the cost of a policy to restrict water trades to mining firms in northern Chile to protect riparian ecosystems and indigenous agriculture. In response to the policy, mining firms have developed high-cost desalination and pumping facilities to secure adequate water supplies. We develop a methodology and estimate the cost of market transactions that fail to occur due to the policy. Lost trade surplus is estimated at $52 million per year. Without trade restrictions, around 86% of the remaining agricultural water in the region would be transferred to mining.

Suggested Citation

Edwards, Eric C. and Cristi, Oscar and Edwards, Gonzalo and Libecap, Gary D., An Illiquid Market in the Desert: Estimating the Cost of Water Trade Restrictions in Northern Chile (January 2016). NBER Working Paper No. w21869. Available at SSRN: https://ssrn.com/abstract=2717278

Eric C. Edwards (Contact Author)

Utah State University ( email )

UMC 4835
Logan, UT 84341
United States

Oscar Cristi

Universidad del Desarrollo ( email )

No Address Available

Gonzalo Edwards

Pontifical Catholic University of Chile - Institute of Economics ( email )

Casilla 76
Correo 17
Santiago
Chile

Gary D. Libecap

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management ( email )

4670 Physical Sciences North
Santa Barbara, CA 93106-5131
United States
805-893-8611 (Phone)

HOME PAGE: http://www.esm.ucsb.edu/people/usernew.asp?user=glibecap

University of Arizona - Karl Eller Center ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States
520-621-4821 (Phone)
520-626-5269 (Fax)

HOME PAGE: http://www.bpa.arizona.edu/~libecap

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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