Interregional Spillovers in Regional Impact Assessment: New Mexico, Texas, and the Supreme Court

Abstract

Input-output models are frequently used to estimate impacts, benefits or damages from some event. These analytic models and the questions they are designed to answer are usually based on political definitions of regions. However the true impacts propagate according to the actual spatial pattern of the regional economy. Because of the divergence between the political regions used for analysis and the economic regions on the ground, the economic impacts which spill over political boundaries can sometimes become analytically important. This paper applies these concepts to a case study of allocating irrigation water from the Pecos River in Texas and New Mexico. The US.Supreme Court has ruled that New Mexico used water belonging to Texas. Our analysis suggests that the spillover benefits to Texas from New Mexico's use of the water might equal or exceed the benefits which Texas would have gotten from using the water itself. Texas might be better off because New Mexico took its water. EGIONAL INPUT-OUTPUT MODELS ARE OFTEN THE TOOL OF CHOICE WHENR economists are asked to estimate impacts, benefits or damages to some region from a past or future event. Yet a problem can arise from the fact that impacts spread according to the contours of the regional economy, while the Joel R. Hamilton is a professor of agricultural economics and M . Henry Robison is a senior research economist with the Center for Business Development and

Measuring direct and indirect costs of land retirement in an irrigated river basin: A budgeting regional multiplier approach

“…However, indirect impacts do not stop at the border of the directly impacted region; they spillover into the economies of neighboring regions. As Hamilton et al [1994] note, the rural Pecos drainage economy is dominated hierarchically from two directions: by nearby Texas trade centers (Amarillo, Lubbock, and El Paso) and by the rest of New Mexico (centered in Albuquerque).…”

“… Hamilton et al [1991, 1994] have noted several problems encountered in the empirical estimation of the direct and indirect regional costs of public projects when economic impacts as measured by input output procedures are improperly translated into measures of regional project benefit and/or cost. Decisions and assumptions regarding the conceptual treatment of how the opportunity cost of displaced factors is measured and the time period over which primary factors are idled significantly affect the total regional policy cost (benefit) estimate when moving from a measure of economic impact to a net regional welfare change measure.…”

The integration of water quality into transboundary allocation agreements Lessons from the southwestern United States

“…Analysis of direct and indirect economic impacts were critical in the resolution of the damage phase of this case. While Texas claimed some $ 50 million in damages, analysis of regional spillover benefits showed greater economic benefits to Texas if the water continued to be used in New Mexico (Hamilton et al, 1994). Irrigators in New Mexico, being closer to Texas suppliers, purchased most of their inputs in Texas.…”

Community input-output models for rural area analysis with an example from central Idaho

“…Robison and Miller (1988) discuss the errors that can result in uniform region nonsurvey I-O modes when these fail to capture regions that are in some sense central place-based functional economic areas. Hamilton et al (1994) use a model that captures trade dominance across state lines to estimate damages in a US Supreme Court involving Texas and New Mexico. And Duffy-Deno and Robison (1995) use a model based on central place trade to measure interregional effects in an analysis of state-level fiscal impacts.…”