Conference Agenda

We explore the effect of water scarcity decrees (WSDs) on the water property rights (WPRs) prices in Chile’s water market. Using the Standardized Precipitation Index and the River Flow Index as instrumental variables, we generate exogenous variation in the intensity of WSD to estimate the effect of climate risk on WPR prices. We find that the prices of the WPR increase by 9.9\% following an additional WSD. The effect varies by water scarcity risk: In areas with fewer accumulated decrees (below the median), WSD increases the value of water by 66.7%, suggesting that WPRs act as a hedge against climate risk. In contrast, in regions with more accumulated decrees (above the median), the price increase is less (4%), indicating that the ownership of water may have limited economic value when supply is scarce. Our study highlights the ability of financial markets to provide information that could help societies adapting climate change.

We study the economic impacts of a rural-urban water transfer on an urban economy, using the 1920's Owens Valley water transfer to Los Angeles (LA) County---one of the largest and most controversial rural-urban water transfers in US history---as a natural experiment. We examine the transfer's overall effects on LA County's gross domestic product (GDP) per capita and its two primary components: the per-capita value of agricultural and manufacturing output. We also assess the water transfer's impact on subsequent urban sprawl in LA County. We find positive effects overall, i.e., the 1920's Owens Valley water transfer impelled decades-long GDP growth and urban sprawl in LA County. The county's overall economic growth was in turn driven by growth in its per-capita value of manufacturing output, at the expense of agricultural output. The study contributes to the understanding of the short- and long-term impacts of large water transfers on importing regions.

We study the stochastic dynamics of natural resources under the threat of ecological regime shifts. We establish a Pareto optimal framework of regime shift detection under uncertainty that minimizes the delay with which economic agents become aware of the shift. We integrate ecosystem surveillance in the formation of optimal resource extraction policies. We fully solve the case of a profit-maximizing monopolist, study its response to regime shift detection and show the generality of our framework by extending our results to other decision makers and functional forms. We apply our framework to the case of the Cantareira water reservoir in São Paulo, Brazil, and study the events that led to its depletion and the consequent water supply crisis.

This paper examines the effects of local water scarcity management on housing markets, water use, and welfare in Colorado. Rising costs of securing water for new developments have led water utilities to raise the water impact fees (WIFs) that home builders pay to connect new units to the water system, and to adopt variable WIFs based on expected water use. Using a novel dataset on water utility policies, housing outcomes, and aerial imagery with a staggered difference-in-differences approach, I find that variable WIFs reduce new single-family lot sizes by 15% and irrigated areas by 30%, decreasing household water use by 15%. I also find that WIFs are fully capitalized into house prices. To estimate the effect on total water use, housing supply, and welfare, I develop and estimate an equilibrium model of new single-family housing where landowners endogenously choose the lot size and irrigated area of new housing. I estimate that variable pricing policies have increased welfare by $120 million and consumer surplus by $3,500 per household. However, even though metropolitan-area level water use declines, changes to housing supply cause a local rebound effect that increases utility-level water use among adopting providers by 3%. In contrast, counterfactual policies that cap irrigated areas lower utility-level water use among adopters by 8%, but have limited welfare effects.