Doctoral Dissertation Research in Economics: Institutional Adaptation to a Heterogeneous Common Pool Resource: Management of the Critical High Plains Aquifer in Kansas

National Bureau Of Economic Research Inc, Cambridge MA

Investigators

Abstract

Doctoral Dissertation Research in Economics: Institutional Adaptation to a Heterogeneous Common Pool Resource: Management of the Critical High Plains Aquifer in Kansas ABSTRACT INTELLECTUAL MERIT: Tens to hundreds of feet declines in water table elevation in western Kansas since the widespread adoption of groundwater irrigation in the 1950s has led to concern about competitive overdraft of the aquifer and the economic future of the entire region. Like many regions worldwide, the agricultural economy of western Kansas is critically dependent upon groundwater. Economic theory suggests that the common nature of the groundwater resource can lead to insufficient incentives for groundwater conservation absent pumping restrictions. In-depth study of institutional and hydrologic factors is required to understand the nature and possible solutions to groundwater depletion in western Kansas and around the world. Groundwater management districts are prevalent throughout the United States to help address overdraft. Understanding what problems districts in Kansas are faced with and why depletion may still occur informs improved groundwater management policy throughout the US and potentially in the developing world where institutional control is in the early stages of development. The proposed work will demonstrate to resource managers and policymakers how physical properties of a hydrologic system are translated into incentives to support or oppose management. This work aims to shed light on how effective local management is and the factors that influence its success. BROADER IMPLICATIONS: This project addresses three critical questions for groundwater management worldwide: (1) How do the hydrologic variables of recharge, specific yield, hydraulic conductivity, and saturated thickness affect economic outcomes of farm size, farm value, and crop choice? (2) How do physical factors impact incentives to control pumping externalities through more complete property rights definition? (3) How do different management regimes control pumping externalities and change economic outcomes? We collect and analyze new data to answer these questions: parcel sale and characteristic data to match economic data at the section (square-mile) level with hydrological data already available; and institutional data on the emergence and management of groundwater districts in Kansas. This project offers a unique approach to the economics of groundwater management by including spatial hydrologic variables in an empirical framework. While economic discussions of soil erosion control districts and irrigation districts exist, groundwater management districts have not been adequately examined. They are critical for aquifer protection and are the focus of this project. Common management regimes exist in a variety of forms throughout the US and world. Recent work has demonstrated the importance of aquifer heterogeneity and spatial externalities in management success, and this proposal builds on these insights by testing the impact of these factors on economic outcomes. While hedonic methods have been applied to surface water rights, little has been done to extend this analysis to groundwater or to determine the effect of physical groundwater characteristics on farm value as is proposed here. Changes in farm values related to the adoption of groundwater management regimes should affect individual incentives for engaging in such management. This research examines that relationship. The proposal moves beyond the broad and abstract social planner paradigm to look at incentives of individual users to cooperate in groundwater pumping controls and the effect these incentives have on management outcomes. By taking an interdisciplinary approach, this project demonstrates the economic significance of hydrologic phenomena. It also provides a framework for economists to take advantage of hydrologic data to empirically address physical system heterogeneity in management success.