The effect of prior appropriation water rights on land-allocation decisions in irrigated agriculture

The doctrine of prior appropriation, which administers water rights based on seniority, may introduce heterogeneity in the risk of a water shortage among otherwise similar agricultural irrigators. We develop a theoretical model that describes how farmers with differing seniority in water rights adjust land-allocation decisions in response to an anticipated change in water deliveries. Using a fine-scale dataset of spatially referenced surface water rights for Idaho's Eastern Snake River Plain, we find evidence that irrigators with differing water rights make systematically different land-allocation decisions, and that farmers with the most junior (least secure) water rights are most responsive to an expected water shortage. These irrigators adapt to anticipated dry conditions by increasing land fallowed and planting a less profitable, drought-resilient mix of crops. Relatively dry growing season conditions exacerbate the potential for prior appropriation to introduce inefficiencies by driving a divergence in resource-use decisions between otherwise similar irrigators with differing water rights.