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Groundwater sustainability depends on balancing aquifer inflows and outflows. Extraction (pumping of groundwater, typically for human use) and recharge (inflow of water to an aquifer from the land surface and streams) are central components of this water balance. Often, increasing demands for groundwater are exacerbated by stresses on limited surface water supplies. Changes in land use and shifting climate can result in less infiltration of precipitation into the ground, reducing recharge. Increasing water scarcity has led to increased pumping, and in turn, unsustainable management of groundwater in many basins, resulting in depleted supplies, degraded water quality, and other impacts. Conservation strategies have reduced demand in some basins, and there are also opportunities for increasing recharge; both strategies can help to tip the water balance towards sustainability. Natural recharge occurs across the landscape, in forests and fields, and below rivers and streams; it is a fundamental hydrologic process that is difficult to measure or control because it varies so greatly in location and timing. Managed aquifer recharge (MAR) is a set of techniques used to improve groundwater conditions by routing more surface water into aquifers. MAR can be applied at many scales, from street corner swales to regional systems. MAR based on the distributed collection of stormwater (“distributed MAR”) can be accomplished at an intermediate scale, generating hundreds to thousands of acre-feet/year of infiltration benefit. The promise of distributed MAR stems from its modest cost, and comparative simplicity of design and operation. Distributed MAR projects can be developed on private or public land across a groundwater basin, potentially generating more total benefit than smaller scale installations, and with less cost and complexity than regional MAR systems. A key challenge for developing distributed MAR projects lies in creating incentives that will motivate landowners, tenants, and other stakeholders to participate. Distributed MAR projects can be funded by a limited number of private participants, but public benefits may accrue more broadly. Developing and implementing policies to encourage the creation and operation of distributed MAR systems is a challenge at the frontier of groundwater management.

In a series of studies employing a variety of approaches, we have found that the potential impact of climate change on US agriculture is likely negative. Deschênes and Greenstone (2007) report dramatically different results based on regressions of agricultural profits and yields on weather variables. The divergence is explained by (1) missing and incorrect weather and climate data in their study; (2) their use of older climate change projections rather than the more recent and less optimistic projections from the Fourth Assessment Report; and (3) difficulties in their profit measure due to the confounding effects of storage.

In this paper we present a new utility model that serves as the basis for modeling discrete/continuous consumer choices with a general corner solution. The new model involves a more flexible representation of preferences than what has been used in the previous literature and, unlike most of this literature, it is not additively separable. This functional form can handle richer substitution patterns such as complementarity as well as substitution among goods. We focus in part on the Quadratic Box-Cox utility function and examine its properties from both theoretical and empirical perspectives. We identify the significance of the various parameters of the utility function, and demonstrate an estimation strategy that can be applied to demand systems involving both a small and large number of commodities.

Although complex pricing schedules are increasingly common in utility billing, it is difficult to determine whether consumers respond to complicated marginal prices because price changes are often confounded with simultaneous demand shocks or non-price policies. To overcome this challenge, we exploit a natural experiment - the introduction of a third price block in an increasing block pricing schedule for water - in Santa Cruz, California. Using a regression discontinuity design, we find that consumers do respond to changes in marginal price. Doubling marginal price led to a 12% decrease in water use (500 cubic feet per bill) among high-use households.

Valuation of morbidity associated with childhood asthma is signi…cant both to policy and to non-market valuation methodologies. Our results show that household perceptions and beliefs, such as belief in one’s ability to predict and control asthma attacks, and relative perceptions of the overall burden asthma places on a family, have a larger impact on valuation than traditional measures of asthma severity. More generally, our approach can be applied to other chronic illnesses as well, such as diabetes or chronic pain.

Researchers using revealed preference data have mostly relied on the Mixed Logit (ML) framework to model unobserved heterogeneity. In this paper, we suggest an extension of this model where we integrate direct measures of taste and revealed preferences, under a unified econometric setting, to describe heterogeneous preferences for congestion in recreation demand. ML is a random parameter discrete choice model, which decomposes the coefficients of the regression equation into a mean effect shared by all individuals in the sample, and a deviation with respect to this mean, specific to each individual. Within this structure, heterogeneity is summarized using a parametric density function for the coefficients of the model. From this distribution one can identify the portion of people who like or dislike an attribute of the good. On the other hand, taste indicators, represented in a like-dislike scale, constitute complementary information about the distribution of tastes in the population. We combine both sources of information to characterize preferences in our model. The traditional ML suggests almost 60% of people in the sample like crowded places while our integrated model implies almost 100% of the people dislike congestion. These results show the bene…ts of using taste indicators to describe heterogeneous preferences for attributes describing alternatives of a choice set.

This paper uses a finite mixture logit (FML) model to investigate the heterogeneity of preferences of beach users for water quality at beaches in Southern California. The results are compared with conventional approaches based conditional logit (CL) and random parameters logit (RPL). The FML approach captures variation in preferences by modeling individual recreator choices using a mixture of several distinct preference groups, where group membership is a function of individual characteristic and seasonal variables. The FML parameter estimates are used to calculate welfare measures for improvements in beach quality through a reduction of water pollution. The FML segment specific welfare measures bound the traditional CL and RPL mean welfare estimates, and have the advantage of highlighting the distribution of the population sample’s preferences. Analysis of beach recreation site choice data indicates the existence of four representative preference groups within the survey respondent sample. As a result, willingness to pay measures for improvements in water quality and other beach site attribute changes can be weighted across individuals to calculate the distribution of individual welfare measures. One group of recreators is characterized as people who go to the beach and engage in water recreation with children. An interesting finding is that this group has a lower meanWTP for improving water quality than groups who go without children. This may well be an example of cognitive dissonance: parents find they go to the beach more often than others who don’t have children, since that keeps the children occupied and happy, and they adapt their perception of the water quality to be consistent with their behavior.Previous environmental and resource economic applications of the FML have been limited to applications with small choice sets (6) and group membership variables (4). This paper extends the FML model through the estimation of a large (51) choice set with 9 membership variables. This application is the first to incorporate seasonal variables into the group membership function to capture seasonal heterogeneity.Estimated welfare changes are calculated using the compensating variation measure for several hypothetical beach closure and water quality degradation scenarios. Estimation results indicate that the FML welfare estimates differ from those calculated using the traditional logit or RPL models. The FML model sheds light onto which subsets of beach recreators are likely to be impacted by different scenarios of resource change.

We provide a new, more general definition for the irreversibility effect and demonstrate its relevance to problems involving environmental and other decisions under uncertainty. We establish several analytical and numerical results that suggest both that the effect holds more widely that generally recognized, and that an existing result (Epstein's Theorem), giving a sufficient condition for determining whether the effect holds, can be applied more widely than previously indicated, in particular to problems involving intertemporarally nonseparable benefit functions. We further show that a low elasticity of intertemporal substitution will however result in failure of the effect.

We use the geo-referenced June Agricultural Survey of the U.S. Department of Agriculture to match values of individual farms in California with a measure of water availability as mediated through irrigation districts, and degree days, a nonlinear transformation of temperature, controlling for other influences on value such as soil quality, to examine the potential effects of climate change on irrigated agriculture in California. Water availability strongly capitalizes into farmland values. The predicted decrease in water availability in the latest climate change scenarios downscaled to California can therefore be expected to have a significant negative impact on the value of farmland. © 2007 Springer Science+Business Media, Inc.

We propose a detailed analysis of heterogeneity in households’ responses to water conservation programs (price increase, voluntary and mandatory conservation) during periods of water shortage. Using a unique dataset covering water consumption of all residential users in Los Angeles (California) during the drought (1988-1992), we show that households generally were responsive to the conservation measures but that the magnitude of households’ responses varies depending on the instrument and on households’ characteristics, in particular the size of their lot. Price elasticity is estimated between –0.29 and –0.47 in the high season (June-October), and between 0 and –0.19 in the low season (November-May). Results suggest that the voluntary conservation program [resp. mandatory conservation program] induced a reduction in water use which varies from 1 to 13% [resp. 21% to 29%] depending on the season and the size of the lot. The achieved reduction in consumption is however very similar across households. These data also allow us to compare the effectiveness of price and nonprice policies in terms of water savings. Finally, welfare calculations suggest that households with the smallest lot sizes (and lowest income) suffered the greatest loss during the implementation of the water conservation programs.

This paper explains the economic conception of water - how economists think about water. It consists of two main sections. First, it reviews the economicconcept of value, explains how it is measured, and discusses how this has been applied to water in various ways. Then it considers the debate regarding whether or not water can, or should, be treated as an economic commodity, and discusses the ways in which water is the same as, or different than, other commodities from an economic point of view. While there are some distinctive emotive and symbolic features of water, there are also some distinctive economic features that make the demand and supply of water different and more complex than that of most other goods.

We define the irreversibility effect and demonstrate its importance in problems involving investment decisions under uncertainty. We establish several analytical and numerical results that suggest both that the effect holds more widely than generally recognized, and that an existing result (Epstein’s Theorem) giving a sufficient condition for determining whether the effect holds can be applied more widely than previously indicated, in particular to problems involving intertemporally nonseparable benefit functions. We further show that a low elasticity of intertemporal substitution will however result in failure of the effect, but that the effect will hold if the value of information increases in the degree of flexibility.

We link farmland values to climatic, soil, and socioeconomic variables for counties east of the 100th meridian, the historic boundary of agriculture not primarily dependent on irrigation. Degree days, a non-linear transformation of the climatic variables suggested by agronomic experiments as more relevant to crop yield gives an improved fit and increased robustness. Estimated coefficients are consistent with the experimental results. The model is employed to estimate the potential impacts on farmland values for a range of recent warming scenarios. The predictions are very robust and more than 75% of the counties in our sample show a statistically significant effect, ranging from moderate gains to large losses, with losses in the aggregate that can become quite large under scenarios involving sustained heavy use of fossil fuels.

Choice data about recreational activities has usually been available for decisions made at a single point in time. Even when data has been collected over a long interval, analysis has generally ignored the impact of seasonality on the relative value of different attributes, treating all choices as the same. This paper looks at a panel of beach recreators from southern California and tests two possible reasons for seasonally changing preferences. We find that seasonal effects can have a substantial impact on the relative utility to the consumer of water quality and money.

This paper explores the impact on beach attendance of beach closures and the intersite and intertemporal substitution that may follow beach closures. A model of beach attendance is developed that builds on a model constructed by Paul Ruud to support the State of California's claim to damages after the American Trader oil spill off the coast of Orange County, southern California. Newly gathered data on beach closures is combined with data on daily attendance from 1985-1993. Variables are constructed to test for intersite substitution (the shifting of beach recreation in space, i.e. from a closed beach to another beach) and intertemporal substitution (the shifting of demand for recreation at a particular beach over time). The method of non-linear least squares is used to estimate a system of five seemingly unrelated regression equations. For each equation, Breush-Pagan tests for heteroskedasticity fail to reject the null hypothesis of homoscedasticity and modified Breush-Godfrey tests for autocorrelation fail to reject the null hypothesis of no autocorrelation. The analysis produces only weak evidence to support rejection of null hypotheses that there are no effects due to beach closures, intertemporal substitution, or intersite substitution. For example, just two of six coefficients on closure variables are statistically significant. The lack of stronger evidence of casual effects likely reflects at least in part the fact that (1) the attendance data that form the foundation for analysis only extend from December to March and (2) people can still visit the beach when it is "closed" since the closures considered here pertain only to water contact. Such closures will likely have a greater effect during summer when air and water temperatures are higher and more people will want to engage in water-based recreation.

This paper reviews the achievements of Middle East environmental diplomacy under the multilateral track and lays out a feasible program to build on these achievements. It argues that negotiations should be informed by three lessons from the history of international water diplomacy. These are:1) unequal partners may unequally share the costs and benefits of cooperation;2) third-party mediation is most successful if accompanied by “carrot and stick” policies; and3) cooperation should proceed as a series of modest steps, rather than as a grand regional plan.The paper analyzes three issues in urgent need of multicountry cooperation. These are:1) food for water trades to enhance food and water security in the region;2) a transition to integrated pest management to halt the pollution of groundwater from agricultural runoff; and3) the treatment and reuse of urban wastewater for health and water conservation.In addition, the countries of the region should, jointly and individually, invest in environmental training and outreach. The conclusion contains an itemized list of short-to-intermediate term recommendations for environmental diplomacy.

To reduce the potential for response bias on the follow-up bid in multiple-bound discrete choice CVM questions while maintaining much of the efficiency gains of the multiple-bound approach, we introduce the one-and-one-half-bound (OOHB) approach. Despite the fact that the OOHB model uses less information than the double-bound (DB) approach, efficiency gains in moving from single-bound to OOHB capture a large portion of the gain associated with moving from single-bound to DB. In an analysis of survey data, our OOHB estimates demonstrated higher consistency with respect to the follow-up data than the DB estimates and were more efficient as well.

This paper makes an attempt to introduce preference uncertainty into discrete choice models used in contingent valuation experiments. We develop an econometric model which may characterize the degree of the uncertainty and provide an empirical illustration of the suggested model.

We consider sequences where a subset of public goods are systematically being created or destroyed. For the case of strict Hicksian substitutes between all pairs of this subset of public goods, we show that willingness to pay for an increase in a particular public good is strictly decreasing the farther out in a sequence it is valued. For the destruction of public goods the reverse is true for willingness to accept compensation. Thus, sequencing has opposite implications for the assessment of the benefits of providing public goods and for the assessment of the damages from destroying them.

Water suppliers have been adopting new rate structures to promote conservation. The shift away from rates based on historical average cost toward rates based on marginal cost has been motivated by the desire to send consumers the "right" price signal about the need to conserve drinking water. The shift toward conservation rate structures, though perhaps providing better incentives to use scarce water resources wisely, has predictable effects-it changes who pays what and it increases the variability of future revenue streams to the water agency. Though the definition of the "correct" rate structure can rightfully vary in different communities-depending on the marginal cost of new supplies or avoided demand and on the community's understanding of equity-the managerial strategies necessary to cope with the uncertainty brought about by conservation rate structures are universal. Revenue instability creates direct costs for water suppliers in the form of increased costs for borrowing, to say nothing of the indirect but very real costs of more complicated planning to provide for a reliable supply of water in the future. This study empirically examines the experience of water agencies that have adopted conservation rate structures and proposes ways for using quantitative tools to: 1) measure and cope with the added uncertainty; and 2) make explicit the magnitude of tradeoffs between revenue stability, equity, and the provision of incentives for efficient use of water resources.