Land Markets and the Value of Water: Hedonic Analysis Using Repeat Sales of Farmland. (10th April 2014)

• Record Type: Journal Article
• Authors: Buck, Steven; Auffhammer, Maximilian; Sunding, David
• Is Part Of: American journal of agricultural economics. Volume 96:Number 4(2014)
• Page Start: 953
• Page End: 969
• Publication Date: 2014-04-10
• Subjects: Q15 -- Q24 -- Q25; Agriculture -- Economic aspects -- Periodicals; Agriculture -- Periodicals; 338.105
• DOI: 10.1093/ajae/aau013
• Languages: English
• ISSNs: 0002-9092

Abstract

Abstract : The lack of robust water markets makes it difficult to value irrigation water. Because water rights are appurtenant to land, it is possible to infer the value of water from observed differences in the market price of land. We use panel data on repeat farmland sales in California's San Joaquin Valley to estimate a hedonic regression equation with parcel fixed effects. This controls for sources of omitted variables bias and allows us to recover the value of irrigation water to landowners in our sample. We show that a more traditional cross-sectional regression results in an artificially low value of irrigation water.