Abstract

This study uses a difference-in-differences framework to explore the effect of a groundwater restriction on irrigation management strategies. In 1992, the Kansas Department of Agriculture created an Intensive Groundwater Use Control Area (IGUCA) to improve streamflow in Walnut Creek, which feeds water to a highly important migration point on the mid-continent flyway. The program allocates permission to extract groundwater in five-year allotments. The stringency of the IGUCA restriction depends on the seniority of the water right. We find significant reductions in water use along the intensive margin for senior water rights and along both the intensive and extensive margins for junior water rights. The results indicate significant reductions in water use that imply negative welfare impacts on farmers. We also find evidence of dynamically optimal behavior within each five-year allotment period.

Practical information