TY - JOUR
T1 - Water Markets, Water Courts, and Transaction Costs in Colorado
AU - Womble, Philip
AU - Hanemann, W. Michael
N1 - Funding Information:
We appreciate the assistance of D. Condren and N. Lee-Ammons at the University of Colorado-Boulder, who along with P.W. administered in-person interviews for the survey. We also thank D. Condren for coding and performing content counts of qualitative interview data. We thank the Colorado Water Congress, Colorado Bar Association's Water Law Section, Colorado chapter of the American Water Resources Association, Colorado Water Courts, and Colorado State Engineer's Office for distributing advertisements for the survey. We thank survey participants for donating time to participate. We thank J.T. Wood for providing early insight on water transfers in Colorado. We thank WestWater Research, LLC, for contributing data on Colorado water rights prices for the study. Data in the paper is available at https://doi.org/10.17605/OSF.IO/AFS26, with the exception of the WestWater data on past water rights prices and transaction characteristics, which were acquired under a nondisclosure agreement. We thank B. Bovee and K.J. Quesnel for comments on the manuscript. We thank the anonymous reviewers, whose comments substantially improved this manuscript. Identifying data on interview subjects are withheld in compliance with Human Subjects Protocol. P.W. acknowledges funding from a Stanford University Interdisciplinary Graduate Fellowship, the Robert and Patricia Switzer Foundation, the Babbitt Center for Land and Water Policy at the Lincoln Institute of Land Policy, a W.C. and J.M. Landreth Fellowship and Grant, a McGee/Levorsen Research Grant, and a Sawtooth Software grant. Any errors are ours.
Funding Information:
We appreciate the assistance of D. Condren and N. Lee‐Ammons at the University of Colorado‐Boulder, who along with P.W. administered in‐person interviews for the survey. We also thank D. Condren for coding and performing content counts of qualitative interview data. We thank the Colorado Water Congress, Colorado Bar Association's Water Law Section, Colorado chapter of the American Water Resources Association, Colorado Water Courts, and Colorado State Engineer's Office for distributing advertisements for the survey. We thank survey participants for donating time to participate. We thank J.T. Wood for providing early insight on water transfers in Colorado. We thank WestWater Research, LLC, for contributing data on Colorado water rights prices for the study. Data in the paper is available at https://doi.org/10.17605/OSF.IO/AFS26 , with the exception of the WestWater data on past water rights prices and transaction characteristics, which were acquired under a nondisclosure agreement. We thank B. Bovee and K.J. Quesnel for comments on the manuscript. We thank the anonymous reviewers, whose comments substantially improved this manuscript. Identifying data on interview subjects are withheld in compliance with Human Subjects Protocol. P.W. acknowledges funding from a Stanford University Interdisciplinary Graduate Fellowship, the Robert and Patricia Switzer Foundation, the Babbitt Center for Land and Water Policy at the Lincoln Institute of Land Policy, a W.C. and J.M. Landreth Fellowship and Grant, a McGee/Levorsen Research Grant, and a Sawtooth Software grant. Any errors are ours.
Publisher Copyright:
©2020. American Geophysical Union. All Rights Reserved.
Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
PY - 2020/4/1
Y1 - 2020/4/1
N2 - Water markets increasingly facilitate adaptation to water scarcity, but transaction costs can be barriers to expanded water marketing, particularly under water rights law in the western United States. However, transaction costs are rarely measured, and existing research commonly overlooks how transaction costs differ across individual water transfers and uncertainty in those costs. We collected hundreds of estimates of procedural transaction costs—costs incurred by transfer proponents for legal and hydrologic experts—by surveying 100 water professionals in the state of Colorado. There, water markets are among the most active in the United States, convey perhaps the most clearly defined private property rights of any state, and, unique to Colorado, require approval from specialized water courts. We elicited costs for water transfers with differing physical and legal characteristics, and we elicited separate assessments of (i) probabilities of legal outcomes for water transfers and (ii) transaction costs conditional on those outcomes. Then, we estimated expected transaction costs with a statistical model that combines (i) with (ii). The model reveals systematic differences in transaction costs, with scale economies and higher transaction costs for water-scarce regions, senior water rights, and higher-conflict legal outcomes. It also shows substantial transaction cost uncertainty, which itself can discourage trading. Our novel survey and estimation procedure develops a replicable approach for measuring transaction cost heterogeneity and uncertainty. Additionally, qualitative survey data we collected indicate transaction costs have increased over time due to growing competition for scarce water and that, despite high transaction costs, specialized water courts offer unique benefits.
AB - Water markets increasingly facilitate adaptation to water scarcity, but transaction costs can be barriers to expanded water marketing, particularly under water rights law in the western United States. However, transaction costs are rarely measured, and existing research commonly overlooks how transaction costs differ across individual water transfers and uncertainty in those costs. We collected hundreds of estimates of procedural transaction costs—costs incurred by transfer proponents for legal and hydrologic experts—by surveying 100 water professionals in the state of Colorado. There, water markets are among the most active in the United States, convey perhaps the most clearly defined private property rights of any state, and, unique to Colorado, require approval from specialized water courts. We elicited costs for water transfers with differing physical and legal characteristics, and we elicited separate assessments of (i) probabilities of legal outcomes for water transfers and (ii) transaction costs conditional on those outcomes. Then, we estimated expected transaction costs with a statistical model that combines (i) with (ii). The model reveals systematic differences in transaction costs, with scale economies and higher transaction costs for water-scarce regions, senior water rights, and higher-conflict legal outcomes. It also shows substantial transaction cost uncertainty, which itself can discourage trading. Our novel survey and estimation procedure develops a replicable approach for measuring transaction cost heterogeneity and uncertainty. Additionally, qualitative survey data we collected indicate transaction costs have increased over time due to growing competition for scarce water and that, despite high transaction costs, specialized water courts offer unique benefits.
KW - Colorado water
KW - transaction costs
KW - water courts
KW - water law
KW - water markets
KW - water rights
UR - http://www.scopus.com/inward/record.url?scp=85083955797&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85083955797&partnerID=8YFLogxK
U2 - 10.1029/2019WR025507
DO - 10.1029/2019WR025507
M3 - Article
AN - SCOPUS:85083955797
VL - 56
JO - Water Resources Research
JF - Water Resources Research
SN - 0043-1397
IS - 4
M1 - e2019WR025507
ER -