Date of this Version
2006 by Nicholas Brozović, David L. Sunding, and David Zilberman.
Most existing economic analyses of optimal groundwater management use single-cell aquifer models, which assume that an aquifer responds uniformly and instantly to ground- water pumping. This paper demonstrates how spatially explicit aquifer response equations from the water resources engineering literature may be embedded in a general economic framework. Calibration of our theoretical model to published economic studies of spe- cific aquifers demonstrates that, by averaging basin drawdown across the entire resource, existing studies generally understate the magnitude of the groundwater pumping external- ity relative to spatially explicit models. For the aquifers studied, the drawdown predicted by single- cell models may be orders of magnitude less than that predicted by a spatially explicit model, even at large distances from a pumping well. Our results suggest that single-cell models may be appropriate for analyses of the welfare effects of groundwater management policies either in small aquifers or in larger aquifers where average well spac- ings are tens of miles or more. However, in extensive aquifers where well spacings are on the order of a few miles or less, such as many of those of concern to groundwater managers and policy makers, use of single-cell models may result in misleading policy implications due to understatement of the magnitude and spatial nature of the groundwater externality.
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