Collective Action by Contract: Prior Appropriation and the Development of Irrigation in the Western United States

63 Pages Posted: 25 Apr 2016

See all articles by Bryan Leonard

Bryan Leonard

Arizona State University (ASU)

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: April 2016

Abstract

We analyze the economic determinants and effects of prior appropriation water rights that were voluntarily implemented across an immense area of the US West, abruptly replacing common-law riparian water rights. At the same time and place, vast private irrigation infrastructure added to the US capital stock. We build upon Ostrom and Gardner (1993) and model irrigation as a coordination problem to show how prior appropriation facilitated greater private infrastructure development than was possible under the baseline riparian system by i) securing access to water against future entry and ii) defining a property right that formed the basis for contracting around collective action problems among numerous, heterogeneous agents. We construct a dataset of 7,800 rights in Colorado, established between 1852 and 2013 including location, date, size, infrastructure investment, irrigated acreage, crops, topography, stream flow, soil quality, and precipitation to test the predictions of the model. We find that prior appropriation facilitated cooperation, doubling infrastructure investment and ultimately contributing between 3% and 21% of western state income in 1930. These outcomes are relative to the baseline alternative of a riparian system. The analysis reveals institutional innovation that informs our understanding of the development of property rights, prior appropriation, and contemporary water policy.

Suggested Citation

Leonard, Bryan and Libecap, Gary D., Collective Action by Contract: Prior Appropriation and the Development of Irrigation in the Western United States (April 2016). NBER Working Paper No. w22185. Available at SSRN: https://ssrn.com/abstract=2769717

Bryan Leonard (Contact Author)

Arizona State University (ASU) ( email )

Tempe, AZ 85287
United States

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)

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Cambridge, MA 02138
United States

PERC - Property and Environment Research Center

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