Working Paper: NBER ID: w21869
Authors: Eric C. Edwards; Oscar Cristi; Gonzalo Edwards; Gary D. Libecap
Abstract: This paper estimates the cost of a policy to restrict water trades to mining firms in northern Chile to protect riparian ecosystems and indigenous agriculture. In response to the policy, mining firms have developed high-cost desalination and pumping facilities to secure adequate water supplies. We develop a methodology and estimate the cost of market transactions that fail to occur due to the policy. Lost trade surplus is estimated at $52 million per year. Without trade restrictions, around 86% of the remaining agricultural water in the region would be transferred to mining.
Keywords: water trade; environmental regulation; mining; Chile; indigenous agriculture
JEL Codes: N56; N76; Q25; Q28; Q51; Q56
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| policy restricting water trades (Q25) | increased costs for mining firms (L72) |
| increased costs for mining firms (L72) | investment in high-cost desalination and pumping facilities (Q25) |
| policy restricting water trades (Q25) | lost trade surplus (F14) |
| policy restricting water trades (Q25) | higher prices for mining firms for water rights (L72) |
| policy restricting water trades (Q25) | indirect effects on local agricultural production (Q11) |
| policy restricting water trades (Q25) | indirect effects on indigenous water access (Q25) |