Essays in Agricultural and Resource Economics

My thesis uses applied microeconomics and causal inference to illustrate how individuals change their behavior following a variety of policy changes./nMy first chapter explores the effect of the creation of tradable groundwater property rights on groundwater levels and farmer decision-making. Groundwater is an open-access resource that suffers from a tragedy of the commons. Many California communities that have faced rapid depletion of groundwater have sought to mitigate overdraft through groundwater adjudications---a formalization of property rights---or through groundwater management plans (GWMPs) adopted by local governments to monitor and mitigate overdraft conditions, where groundwater extractions exceed recharge. This paper makes three major contributions to the groundwater economics literature. This is the first paper to provide a causal estimate of the effectiveness of groundwater adjudications in halting the decline of groundwater levels, and to compare adjudications performance in mitigating overdraft conditions to that of adopting groundwater management plans. I use a staggered difference-in-differences design, where the identification of the effect of the formalization of property rights on groundwater elevations in California is based on the variation of the timing of adjudication and the timing of management plan adoptions in California. My results suggest basins that engage in a formalization of property rights experience a 13.9% improvement in groundwater depth relative to other open-access basins in California, saving $113 million (2018 USD) in pumping costs. Secondly, I compare the estimates of the effect of adjudications to those of groundwater management plans. I find that groundwater management plans have little to no effect on groundwater elevations. In fact, groundwater elevations drop by 0% to 4.8%, on average, after their adoption. Finally, I use bilateral water trading data in the Mojave Basin with exogenous variation in groundwater entitlements to estimate a marginally significant agriculture exit elasticity of 0.10 and a water supply elasticity of 0.51 in the Alto subbasin of the Mojave. Using the water supply elasticity, with a -0.76 municipal water demand elasticity from the groundwater economics literature, I estimate the gains from trade of groundwater rights to be $8.2 million (2018 USD), where agriculture receives 55% of the gains. This implies the welfare gains from trading groundwater rights are shared by both agriculture and municipal users./nMy second chapter utilizes a change in surface water availability in California to understand how farmers respond in their crop choices. This paper constructs and analyzes a high-resolution dataset of cropping decisions near water rights diversion points in California from 2007-2015. It estimates the average treatment effect of California's recent drought policy, which sharply curtailed the water allocated to junior water rights holders in 2014 and 2015, on crop acreage for 20 different crops. The effect of supply curtailments on crop acreages are obtained using a differences-in-differences strategy. Crop acreage outcomes are compared for junior rights holders before and after the curtailment in 2014, while the planting decisions of those with senior water rights serves as a control group. Repeated observations of land-use decisions within 1,000 meters of water rights diversion points enable the use of fixed-effects to control for unobserved differences within and across water rights. This paper finds that junior rights holders reduced rice, pasture, and tomatoes acreage by 32 (5.0%), 14 (0.8%), and 20 acres (3.0%) respectively, for land within 1,000 meters of a junior water rights diversion point in response to the surface water supply curtailment. This paper also finds suggestive evidence of junior rights holders increasing fallowed acreage by approximately 14 acres (1.8%)./nMy third and final chapter utilizes a change in varieties offered by a supermarket retailer to understand if and how much individuals consumption responds to changes in variety. Restated, as the number of varieties increases, do sales increase or fall? In this paper, we test the conflicting predictions of two theories. The matching theory says that the more varieties, the greater the chance that a consumer will find a desirable one, so the quantity demanded increases. The overload theory holds that excess choice overwhelms a consumer, so demand drops. A national chains quasi-experimental roll-out of new varieties of ice cream and removal of some old varieties allows us to simultaneously identify both effects of changes in varieties. We find support for both theories, and that the matching and overload effects tend to offset each other, except for variety-preferring households.

Advisor: Auffhammer, Maximilian