Management of Groundwater Resources in California: Opportunities for Collaboration and Competition Through Legal Institutions in a Spatial Dynamic Setting
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The common pool nature of groundwater resources presents a challenge to sustainable management. In this dissertation, we present an empirical analysis of the dynamic game of groundwater extraction in California by synthesizing four main chapters. My first chapter introudces our research and summarizes results. In Chapter 2, we analyze groundwater extraction decisions under an open access regime by estimating a structural econometric model of the dynamic game among agricultural, recreational, and municipal groundwater users in the Beaumont Basin in Southern California during a period of open access. We then compare the actual extraction decisions of players after the institution of quantified property rights to a counterfactual scenario of continued open access. In Chapter 3, we develop a model of interjurisdictional spatial externalities in groundwater management, and apply our model to a detailed spatial panel data set to analyze the effects of partial coordination. Chapter 4 focuses on California's adjudicated groundwater property rights system, and develops a structural model of the dynamic game among groundwater users to evaluate the welfare implications of the system. Finally, in Chapter 5, we estimate the parameters of the payoff functions of groundwater users under open access by exploiting recent advances in the fields of dynamic game theory and structural estimation. Results across the four chapters suggest that while property rights on the previously open-access groundwater resource did not deliver significant economic benefits on groundwater users, the joint effect of the property rights system and the introduction of artificial recharge of imported water had a positive spillover effect on the level of groundwater stocks at neighboring basins. Furthermore, our analysis shows that interjurisdictional spatial externalities in groundwater management should be accounted for in the optimal design of groundwater management in California. Finally, we find that municipal water districts tend to value the interests of their customers more than water sale profits, resulting in inefficient underpricing of water and significant social welfare loss. Overall, this dissertation provides evidence for the presence of spatial externalities, inefficiencies resulting from property rights, and the need for policy interventions to improve groundwater management in California.
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Torres, Gerald
Walter, Michael