First Possession of Water in the American West: An Economic Analysis of Property Rights (original) (raw)

We analyze the economic determinants and e↵ects of prior appropriation water rights that were voluntarily implemented across a vast area of the US West, replacing common-law riparian water rights. We analyze potential benefits and test hypotheses regarding search, coordination, and investment. Our novel dataset of 7,800 rights in Colorado, established between 1852 and 2013 includes location, date, size, infrastructure investment, irrigated acreage, crops, topography, stream flow, soil quality, and precipitation. Prior appropriation doubled infrastructure investment and raised the value of agricultural output beyond baseline riparian rights. The analysis reveals institutional innovation that informs contemporary water policy. ⇤For helpful comments we thank Christopher Costello, Olivier Deschênes, Dick Startz, Louis Kaplow, Steve Shavell, and Henry Smith as well as participants at workshops at Indiana University, UC Santa Barbara, Arizona State University, Columbia University, Harvard...