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The Economics of Water: Pricing strategies may safeguard groundwater reserves

Using five years of post-treatment data on farm-level water use, we find that water conservation doubles between the first and fifth year of the tax. – Bruno et al. 2023

New research by Ellen Bruno, Katrina Jessoe, and Michael Hanemann looks at changes in groundwater prices and how this affects the behavior of businesses over time. The team explored a real situation of large and lasting increases in groundwater prices and found that, over the span of five years, farmers used water more efficiently after price increase. This is valuable information, as it suggests if we don't consider how these changes compound over time when making groundwater management regulations, it could result in further problems in how we use water. 

Read the New York Times feature: Coral Davenport. 2023-12-29. Strawberry Case Study: What if Farmers had to pay for water? The New York Times. 

Read the paper: Bruno, E.M., Jessoe, K.K. and Hanemann, M., 2023. The Dynamic Impacts of Pricing Groundwater (No. qt2mx8q1td). Department of Agricultural & Resource Economics, UC Berkeley.


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