Working Paper: NBER ID: w22185
Authors: Bryan Leonard; Gary D. Libecap
Abstract: We analyze the economic determinants and effects of prior appropriation water rights that were voluntarily implemented across an immense area of the US West, abruptly replacing common-law riparian water rights. At the same time and place, vast private irrigation infrastructure added to the US capital stock. We build upon Ostrom and Gardner (1993) and model irrigation as a coordination problem to show how prior appropriation facilitated greater private infrastructure development than was possible under the baseline riparian system by i) securing access to water against future entry and ii) defining a property right that formed the basis for contracting around collective action problems among numerous, heterogeneous agents. We construct a dataset of 7,800 rights in Colorado, established between 1852 and 2013 including location, date, size, infrastructure investment, irrigated acreage, crops, topography, stream flow, soil quality, and precipitation to test the predictions of the model. We find that prior appropriation facilitated cooperation, doubling infrastructure investment and ultimately contributing between 3% and 21% of western state income in 1930. These outcomes are relative to the baseline alternative of a riparian system. The analysis reveals institutional innovation that informs our understanding of the development of property rights, prior appropriation, and contemporary water policy.
Keywords: Prior appropriation; Irrigation; Water rights; Collective action; Property rights
JEL Codes: K11; N51; N52; Q15; Q25; Q28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| prior appropriation (P14) | cooperation among water rights holders (Q25) |
| cooperation among water rights holders (Q25) | infrastructure investment (H54) |
| prior appropriation (P14) | infrastructure investment (H54) |
| infrastructure investment (H54) | long-run increases in income per acre in agriculture (Q15) |
| prior appropriation (P14) | reduced resource access uncertainty (D89) |
| reduced resource access uncertainty (D89) | coordination among heterogeneous agents (D82) |
| coordination among heterogeneous agents (D82) | infrastructure investment (H54) |
| prior appropriation (P14) | economic outcomes (F61) |