Water markets in Australia's Murray-Darling Basin (MDB) and the westem USA are compared in terms of their ability to allocate scarce water resources. The study finds that the gains from trade in the MDB are worth hundreds of millions of dollars per year (note that all monetary units of dollars in this article are treated as US$ because Australians are converted at par). Total market turnover in water rights exceeds US$2 billion per year while the volume of trade exceeds over 20% of surface water extractions. In Arizona, California, Colorado, Nevada and Texas, trades of committed water annually range between 5 and 15% of total state freshwater diversions with over US$4.3 billion (2008 US$; monetary units in dollars are expressed in their value in US$ in 2008) spent or committed by urban buyers between 1987 and 2008. The two-market comparison suggests that policy attention should be directed towards ways of promoting water trade while simultaneously mitigating the legitimate third party concerns about how and where water is used, especially in conflicts between consumptive and in situ uses of water. The study finds that institutional innovation is feasible in both countries and that further understanding about the size, duration and distribution of third party effects from water trade and how these effects might be regulated, can improve water markets' ability to manage water scarcity better.

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We examine the role of irrigation in explaining U.S. agricultural gains post-1940. Specifically, we analyze how productivity and farm values changed in the western United States as a result of technological and policy changes that expanded access to ground and surface water. To statistically identify the effects, we compare counties based on their potential access to irrigation water defined by physical characteristics. We find areas with access to large streams and/or groundwater increase crop production relative to areas with only small streams by $19 billion annually, equivalent to 90 percent of the total annual increase in the western United States after 1940.

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This paper estimates the cost of a policy to restrict water trades to mining firms in northern Chile in order to protect riparian ecosystems and indigenous agriculture. In response to the policy, mining firms have developed high-cost desalination and pumping facilities to secure adequate water supplies. We develop a methodology and estimate the cost of market transactions that fail to occur due to the policy. Lost trade surplus is estimated at US$52 million per year. Without trade restrictions, around 86 per cent of the remaining agricultural water in the region would be transferred to mining.

The American West confronts the challenge of fulfilling indigenous claims to water within the context of increasingly scarce and variable water supplies. 170 of 226 American Indian reservations have unresolved water claims that potentially exceed the region’s hydrological capacity, generating uncertainty for tribes and off-reservation water users. To help resolve key uncertainties about dispute origins and outcomes, we construct a complete and novel dataset on Indian water settlements and reservation characteristics which we then analyze using a bargaining framework from economics. We find that rapid off-reservation population growth, water scarcity, and large anticipated water entitlements catalyze disputes. When more users are involved in the negotiations, transaction costs delay settlement, increasing water insecurity. We use our findings to predict allocations for 25 ongoing water right negotiations. These estimates help bound the uncertainty facing water managers throughout the American West.

American Indian reservations have low incomes and high rates of poverty relative to adjacent communities, and the income gap appears to be even larger for Indian farmers. We examine the extent to which a lack of access to capital might explain these differences using irrigation systems as a proxy for on‐farm investment around the Uintah‐Ouray Indian Reservation in eastern Utah. Uintah land is held in trust by the US government, and farmers on this land face significant barriers to acquiring capital to invest in irrigation equipment and infrastructure. We use the boundaries from a 1905 land allotment as a natural experiment, employing both sharp and fuzzy regression discontinuity designs to explore whether agricultural land use, irrigation levels, irrigation investment, and crop choice differ across the boundary. The original allocation provided similar land in the immediate neighborhood around its borders, and our results suggest that today tribal trust land is farmed and irrigated at rates similar to adjacent land. However, conditional on being irrigated, tribal trust land is around thirty‐two percentage points less likely to utilize capital‐intensive sprinkler irrigation, and up to ten percentage points less likely to grow high‐value crops. Trust ownership, which is characterized by cumbersome bureaucratic processes, limits on agricultural lease flexibility, and the inability to use land as collateral to acquire loans, is a likely explanation for the observed differences.