Job Market Paper
How much can societies adapt to climate change? I provide evidence on this question by studying surface water, a resource that is projected to grow scarcer in much of the world yet is critical to sectors such as irrigated agriculture. To identify adaptation, I compare the long-run and short-run effects of water scarcity on agriculture, which I estimate using institutional variation in water allocation in California. First, I estimate long-run effects using spatial discontinuities in average water supplies at the borders between neighboring water utilities, where farmland is otherwise similar. Then, I estimate short-run effects using weather-driven fluctuations in water supplies from year to year. Using high-resolution satellite data on land use, I find that short-run water scarcity reduces crop area and crop revenue (as predicted by crop choices). Long-run water scarcity shifts land-use patterns in different ways, but predicted crop revenue falls by 85 percent as much as in the short run, implying adaptation is limited. Absent new investments or policy changes, future declines in surface water supplies are likely to notably reduce the land area and output of agriculture.
Water markets may help societies adapt to rising water scarcity and variability, but their setup costs can be substantial and their benefits uncertain. I estimate the gains available from strengthening the wholesale surface water market in California, where conveyance infrastructure is well-developed yet transaction volume remains low. To do so, I develop a new empirical framework to analyze welfare in water markets that uses transactions data. First, I recover marginal valuations of water in the presence of unobserved transaction costs, by using particular price comparisons to find the incidence of both known and unknown cost determinants. Second, I estimate demand using yearly water endowments, which have rich variation driven by weather and amplified by historical rules. Then, I combine this demand model with a hydrological network model to simulate counterfactual outcomes. I find that efficient trading across regions and sectors would achieve benefits of only $86 to $278 million per year, without accounting for any environmental costs. These results suggest that promoting large-scale water markets may not achieve large gains without also reforming the policies and institutions that govern local water allocation.
Industrial water pollution is high in many developing countries, but researchers and regulators have paid it less attention than air and domestic water pollution. I estimate the costs of industrial water pollution to agriculture in India, focusing on 63 industrial sites identified by the central government as “severely polluted.” I exploit the spatial discontinuity in pollution concentrations that these sites generate along a river. First, I show that these sites do in fact coincide with a large, discontinuous rise in pollutant concentrations in the nearest river. Then, I estimate that agricultural revenues are nine percent lower in districts immediately downstream of polluting sites, relative to districts immediately upstream of the same site in the same year, although confidence intervals exclude zero only when controlling for baseline characteristics. This effect appears to be driven by reduced yields per cropped land area and not factor reallocation. These results suggest that damages to agriculture could represent a major cost of water pollution and warrant further study.
In the field
"Measuring Demand for Groundwater Irrigation: Experimental Evidence from Conservation Payments" (with Ariel Zucker) (Study Design)
We measure the price response of demand for groundwater and electricity in irrigated agriculture in Gujarat, India, where both resources are scarce and largely unregulated. To do so, we install meters and introduce a new program of payments for voluntary conservation through a randomized controlled trial. First, we use the price variation introduced by this program to estimate the price elasticity of groundwater demand, a key parameter required for efficient regulation by any means. Then, we evaluate conservation payments as a policy tool in itself. We measure treatment effects on water and energy consumption, as well as spillovers, mechanisms, and economic impacts. We also assess the program’s cost-effectiveness, testing whether there is opportunity for mutual gain between irrigators and electric utilities. This project will provide the first experimental evidence on groundwater pricing and among the first on conservation payments. Pilot evidence confirms that conservation payments are feasible and suggests large effects on water use. Baseline data collection is complete and the intervention is scheduled to begin in 2020.