The Water Transfer Effects of Alternative Irrigation Institutions

Irrigation districts (IDs) use a large portion of the surface water rights in the American West. Microeconomic analysis of water use conditions within IDs indicates that it can be economically optimal for IDs to engage in less reallocative activities compared to private water rights holders. Institutional insights combine to show that the political orientation of IDs favors irrigation over irrigators in the sense that the rewards of water marketing tend to be incompletely captured. Based on an analysis of 38 years of time series water transfer data, we found that IDs underparticipate in agricultural-to-municipal water transfers relative to non-irrigation districts in terms of water right-weighted transfers. The results support further policy redesign if reallocation is to be viewed as a scarcity-solving strategy in ID-dominated regions.