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Lunch & Learn

  • Saieh Hall for Economics 5757 South University Avenue Chicago, IL, 60637 United States (map)

The next lunch and learn is Thursday 1/17 from 12:30 to 1:30 pm in

Saieh 146. Our speaker, Louis Preonas, is a postdoctoral scholar in

the Department of Economics and the Energy Policy Institute. He will

present his work on the elasticity of demand for agricultural

groundwater — more details are provided below. We hope to see you


Title: Spatial Externalities in Groundwater Extraction: Evidence from

California Agriculture

Groundwater is a common-pool resource essential for agricultural

production. When farmers extract a marginal unit of groundwater, this

lowers nearby groundwater levels and increases their neighbors'

groundwater pumping costs. This paper estimates farmers' elasticity of

demand for groundwater, in order to empirically investigate the

magnitude of this spatial "pumping cost" externality. We assemble a

novel dataset that combines (i) detailed microdata on farmers'

electricity consumption, (ii) rich data from technical audits of these

farmers' pump efficiencies, and (iii) publicly available measurements

of groundwater depths in California aquifers. Using exogenous

variation in electricity prices, we estimate farmers' price

elasticities of demand for both electricity (-1.17) and groundwater

(-1.12) to be much larger than previous estimates in the literature.

We then calculate the extent to which each farm lowers its neighbors'

economic surplus by removing water from their shared aquifer. Our

preliminary results suggest that the magnitude of the "pumping cost"

externality is likely smaller than farmers' private costs of

groundwater pumping.


To present, contact Sunny ( or Osamu (

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