RT Journal Article
SR Electronic
T1 The Importance of Well Yield in Groundwater Demand Specifications
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 672
OP 687
DO 10.3368/le.97.3.672
VO 97
IS 3
A1 Mieno, Taro
A1 Rad, Mani Rouhi
A1 Suter, Jordan F.
A1 Hrozencik, R. Aaron
YR 2021
UL http://le.uwpress.org/content/97/3/672.abstract
AB Implementing effective resource management policies critically depends on accurate estimates of the price elasticity of resource demand. In the case of groundwater, previous research estimating well-level groundwater demand has largely neglected the importance of well yield, which is a physical limit on the rate of groundwater extraction. In this study, we empirically estimate the price elasticity of demand for groundwater using well-level data from Colorado. Our results demonstrate that when well yield is omitted, price elasticity is overestimated. This in turn creates inaccurate predictions of the effect of price-based conservation policies on groundwater use and welfare.