Water markets and third-party effects

Jean Marc Bourgeon; William K. Easter; Rodney B.W. Smith

doi:10.1111/j.1467-8276.2008.01146.x

Water markets and third-party effects

Jean Marc Bourgeon, William K. Easter, Rodney B.W. Smith

Applied Economics

Research output: Contribution to journal › Article › peer-review

9 Scopus citations

Abstract

We examine potential third-party effects arising from trading water from one region (rural) to another (urban). Using labor, water and heterogeneous land, rural agents produce a traded agricultural good and nontraded service good. Absent job market frictions, increased water trading improves per capita regional welfare, but aggregate service income can increase (decrease) while individual land rents decrease (increase). If labor experiences job market frictions, water trading can trigger socially inefficient land fallowing, and a decrease in per capita regional welfare. Simulation results confirm the no-job-market-friction model predictions.

Original language	English (US)
Pages (from-to)	902-917
Number of pages	16
Journal	American Journal of Agricultural Economics
Volume	90
Issue number	4
DOIs	https://doi.org/10.1111/j.1467-8276.2008.01146.x
State	Published - Sep 15 2008

Keywords

Job market frictions
Regional economics
Resource economics
Third-party effects
Water markets

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abstract = "We examine potential third-party effects arising from trading water from one region (rural) to another (urban). Using labor, water and heterogeneous land, rural agents produce a traded agricultural good and nontraded service good. Absent job market frictions, increased water trading improves per capita regional welfare, but aggregate service income can increase (decrease) while individual land rents decrease (increase). If labor experiences job market frictions, water trading can trigger socially inefficient land fallowing, and a decrease in per capita regional welfare. Simulation results confirm the no-job-market-friction model predictions.",

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AB - We examine potential third-party effects arising from trading water from one region (rural) to another (urban). Using labor, water and heterogeneous land, rural agents produce a traded agricultural good and nontraded service good. Absent job market frictions, increased water trading improves per capita regional welfare, but aggregate service income can increase (decrease) while individual land rents decrease (increase). If labor experiences job market frictions, water trading can trigger socially inefficient land fallowing, and a decrease in per capita regional welfare. Simulation results confirm the no-job-market-friction model predictions.

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