No abstract

On February 12, 2017, communities below the Oroville Dam near Sacramento, California, were evacuated due to concerns that flooding could cause the dam-the tallest in the United States-to fail. Yet four days earlier, the California State Water Board extended its existing water conservation regulations, noting that much of the state was still experiencing severe drought conditions that had persisted for years. 1 This apparent contradiction underscores the new reality facing water managers in an era when climate change is predicted to shift the timing, location, and amount of precipitation in the western United States (Solomon et al. 2007). Demographic trends indicate that arid regions will face increasing demands for water supplies that will become increasingly difficult to manage (Olmstead 2010).The efficient allocation of water among competing agricultural, municipal, and environmental uses (e.g., in-stream flows for fish habitat) presents a critical policy challenge for local, state, and federal governments in the United States. In the early twentieth century, major public investments in water reclamation infrastructure were undertaken to increase supplies. However, large-scale supply augmentation is not likely in the modern western U.S., not least because it provides perverse incentives for water-intensive development (Stavins and Jaffe 1990;Chong and Sunding 2006;Olmstead et al. 2016). Thus resource managers, policymakers, citizen groups, and the popular press are increasingly considering water markets as a tool for managing water, particularly in the western United States (Easter and Huang 2014).Economists have long discussed the potential efficiency gains and transaction costs associated with surface water markets (Hartman and Seastone 1970;Burness and Quirk 1979;

Does land fragmentation impair spatially expansive natural resource use? We conduct empirical tests using ownership variation on the Bakken, one of the world's most valuable shale oil reserves. Long before shale was discovered, U.S. policies created a mosaic of private, jointly owned, and tribal government parcels on the Fort Berthold Indian Reservation. We find that all three forms of fragmentation reduced production during the 2010–2015 oil boom, especially joint ownership and the interspersion of small parcels of government and private land. We estimate implied gains from consolidation and discuss implications for the use (or conservation) of other spatially expansive resources.

We analyze the economic determinants and effects of prior appropriation water rights that were voluntarily implemented across an immense area of the US West, abruptly replacing commonlaw riparian water rights. At the same time and place, vast private irrigation infrastructure added to the US capital stock. We build upon Ostrom and Gardner (1993) and model irrigation as a coordination problem to show how prior appropriation facilitated greater private infrastructure development than was possible under the baseline riparian system by i) securing access to water against future entry and ii) defining a property right that formed the basis for contracting around collective action problems among numerous, heterogeneous agents. We construct a dataset of 7,800 rights in Colorado, established between 1852 and 2013 including location, date, size, infrastructure investment, irrigated acreage, crops, topography, stream flow, soil quality, and precipitation to test the predictions of the model. We find that prior appropriation facilitated cooperation, doubling infrastructure investment and ultimately contributing between 3% and 21% of western state income in 1930. These outcomes are relative to the baseline alternative of a riparian system. The analysis reveals institutional innovation that informs our understanding of the development of property rights, prior appropriation, and contemporary water policy.

Governments often place restrictions on the transferability of property rights to protect property owners from making "mistakes" such as selling their property under value. However, these restrictions entail costs: they reduce the property's value as collateral in credit markets, limit owners' ability and incentives to invest in the land, and create various transaction costs that constrain optimal land use. We investigate these costs over the long run, using a natural experiment whereby millions of acres of reservation lands were allotted to Native American households under differing land-titles between 1887-1934. We compare non-transferable land plots to neighboring plots held with full property rights, using fine-grained satellite imagery to study differences in land development and agricultural activity from 1974-today.