Water Markets in the West: Prices, Trading, and Contractual Forms

47 Pages Posted: 23 Feb 2007  

Jedidiah Brewer

University of Arizona - Department of Economics

Robert Glennon

University of Arizona - Rogers College of Law; PERC - Property and Environment Research Center

Alan P. Ker

University of Arizona - Department of Agricultural and Resource Economics

Gary D. Libecap

University of California, Santa Barbara - 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

Multiple version iconThere are 2 versions of this paper

Date Written: February 2007

Abstract

Rising urban and environmental demand for water has created growing pressure to re-allocate water from traditional agricultural uses. But, for a variety of reasons, water markets are more complicated than are those for other resources. In this paper, we first explain these differences by examining water rights and regulatory issues. Second, we place our research in the context of other economics literature on water marketing. Third, we present new, comprehensive data on prices and the extent, nature, and timing of water transfers across 12 western states from 1987-2005. Prices are higher for agriculture-to-urban trades versus within-agriculture trades, in part, reflecting the differences in marginal values between the two uses. Prices higher for urban use are also growing relative to agricultural use over time. Markets are responding. The number of agriculture-to-urban transactions is rising over time, whereas the number of agriculture-to-agriculture transfers is not. Further, there is a shift from using short-term leases to using multi-year leases of water and permanent sales of water rights. This pattern underscores the need to consider the amounts of water obligated over time, rather than examining only annual flows in assessing the quantities of water traded as is the common practice in the literature. Considering committed water, we find that more is transferred and the direction of trading is different than if the focus is on annual flows. Finally, the data reveal considerable variation in water trading across the states.

Keywords: Water, Water Law, Trade in Water, Land Use, Property Rights

Suggested Citation

Brewer, Jedidiah and Glennon, Robert and Ker, Alan P. and Libecap, Gary D., Water Markets in the West: Prices, Trading, and Contractual Forms (February 2007). Arizona Legal Studies Discussion Paper No. 07-07. Available at SSRN: https://ssrn.com/abstract=964819 or http://dx.doi.org/10.2139/ssrn.964819

Jedidiah Brewer

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

Robert Glennon (Contact Author)

University of Arizona - Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

Alan P. Ker

University of Arizona - Department of Agricultural and Resource Economics ( email )

1110 E. North Campus Drive
Tucson, AZ 85721-0023
United States
(520) 621-6265 (Phone)

Gary D. Libecap

University of California, Santa Barbara - 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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