Agricultural Economics Department


First Advisor

Karina Schoengold

Date of this Version


Document Type



A thesis presented to the faculty of the Graduate College at the University of Nebraska in partial fulfillment of requirements for the degree of Master of Science

Major: Agricultural Economics

Under the supervision of Professor Karina Schoengold

Lincoln, Nebraska, May 2013


Copyright 2013, Elizabeth M. Juchems


The goal of this thesis is to predict participation in groundwater trading and the directions of trades among participants. Specifically, the paper considers both formal and informal trading of groundwater used for crop irrigation purposes and attempts to identify those characteristics that predict the probability of trade participation and whether an individual is a buyer or seller of groundwater rights. While the public benefits from efficient use of groundwater include adequate stream flow in hydrologically connected areas and future use of groundwater supplies, there are significant private benefits to landowners especially in water-short areas. Groundwater trading can help move water from low-value to high-value areas of use for the benefit of the participating traders and general public.

Previous research on water trading has focused on surface water trading and theoretical approaches to analyzing groundwater trading. Empirical analysis of groundwater trading is a relatively new area of study due in part to the previous lack of recorded usage, trade data and binding constraints on groundwater use by landowners. Results from this research indicate a strong desire to participate in trades, but high transactions costs have limited the number of trades that have occurred. Utilizing empirical models improves the accuracy of predicting trade participation and direction, and therefore the accuracy of models of trade effects on water supplies and stream flows used in policy and decision making.

Adviser: Karina Schoengold