Joint Seminar (SOSC/ENVR)
Spatial Externalities in Groundwater Extraction: Evidence from California Agriculture
Groundwater is a common-pool resource essential for agricultural production. When farmers extract a marginal unit of groundwater, this lowers nearby groundwater levels and increases their neighbors’ groundwater pumping costs. This paper estimates farmers’ elasticity of demand for groundwater, in order to empirically investigate the magnitude of this spatial “pumping cost” externality. We assemble a novel dataset that combines (i) detailed microdata on farmers’ electricity consumption, (ii) rich data from technical audits of these farmers’ pump efficiencies, and (iii) publicly available measurements of groundwater depths in California aquifers. Using exogenous variation in electricity prices, we estimate farmers’ price elasticities of demand for both electricity (−1.17) and groundwater (−1.12) to be much larger than previous estimates in the literature. We then calculate the extent to which each farm lowers its neighbors’ economic surplus by removing water from their shared aquifer. Our preliminary results suggest that the magnitude of the “pumping cost” externality is likely smaller than farmers’ private costs of groundwater pumping.

Fiona Burlig is an assistant professor at the Harris School of Public Policy and the Energy Policy Institute (EPIC) at the University of Chicago. She studies energy and environmental economics, with a focus on the developing world. Prior to joining Harris, she was a postdoctoral scholar in the Department of Economics at the University of Chicago. She holds a PhD in agricultural and resource economics from the University of California, Berkeley, and a BA in economics, political science, and German from Williams College.

Louis Preonas is a postdoctoral scholar at the University of Chicago, in the Department of Economics and the Energy Policy Institute. He is an energy and environmental economist, with research that focuses on interacting market distortions in U.S. energy markets, and the economic impacts of electricity access in the developing world. He holds a PhD in agricultural and resource economics from the University of California, Berkeley. In August 2019, he will join the University of Maryland’s Department of Agricultural and Resource Economics as an Assistant Professor.

Faculty host: Guojun He (
Speaker(s) Prof Fiona Burlig, Assistant Professor
Dr. Louis Preonas, Postdoctoral Scholar
University of Chicago
Date 18 Feb 2019 (Monday)
Time 12:00 - 1:30 pm
Venue Room 3301 (via lifts 17-18), Academic Building, HKUST
Prof Fiona Burlig
Dr. Louis Preonas
Hong Kong University of Science and Technology
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