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Abstract
Recent droughts in the western United States have encouraged the growth of spot markets for water trading in states like California, which witnessed $95 million worth of water exchanged through these transfers during 2009. This article uses water transaction data from Water Strategist Monthly to investigate the effect of droughts on the volume of water transferred in four western states. A statistically significant effect of drought intensity on the volume and price of water is seen. Multiyear leases and sales have a larger effect than annual leases on the amount of water transferred annually.
Acknowledgement
The author would like to thank Gary Libecap and Zach Donohew for graciously allowing the use of the water transfers dataset, Keith Willett for reviewing an earlier version of this article, and Charles Coffman for valuable research assistance.
Notes
1. According to statistics available from Water Market Insider, published in 2017 by Westwater Research, California and Colorado have been the two leading western states in terms of the value of water traded in 2015. California is also the forerunner in the volume of water traded among all 17 western states of the US.
2. WestWater Research does not provide access to the Waterlitix database to individuals or universities who are not directly clients of the firm (phone conversation with Clay Landry, director, June 2016).
3. Results available from the author on request.