Water markets and drought adaptation in the western U.S.
Water markets are intended to reallocate scarce water toward higher-value uses during drought and are often viewed as a potential adaptation mechanism because they can shift water across users, sectors, and locations during periods of scarcity. However, whether voluntary transfers respond to hydrologic stress as theory predicts remains an open empirical question, particularly because legal restrictions, transaction costs, conveyance limitations, and regulatory and administrative barriers may prevent markets from adjusting efficiently when scarcity is most severe.
This project examines water market activity across twelve western U.S. states using transaction records linked with drought, hydrologic, climatic, demographic, and agricultural conditions. It evaluates how market participation, transfer activity, prices, and the overall value of transactions change under varying levels of water scarcity, and who gains and who loses from agriculture-to-urban water rights trading as water becomes scarcer.