The regulation of a spatially heterogeneous externality: Tradable groundwater permits to protect streams

摘要: Groundwater pumping can reduce the flow of surface water in nearby streams. In United States, recent awareness this externality has led to intra- and inter-state conflict rapidly-changing management policies institutions. Although marginal damage groundwater use on stream flows depends crucially location relative streams, current regulations are generally uniform over space. We a population data set irrigation wells Nebraska portion Republican River Basin analyze whether adopting spatially differentiated leads significant reductions farmer abatement costs from find that regulators generate most potential savings total social without accounting for spatial heterogeneity. However, if need increase protection streams significantly levels, will yield sizable cost savings.