Abstract
Over the past three decades, cities and municipalities across the Western U.S. have experienced some of the nation’s fastest population growth. Simultaneously, these regions have confronted increasingly frequent water shortages, primarily caused by droughts. This study fits a spatial equilibrium model to examine how water shortages have influenced household location choice across the region from 2000 to 2020. The research makes two key contributions. First, it introduces a novel metric of water stress – unmet water demand – that synthesizes legal water rights frameworks with hydrological availability, capturing both institutional and environmental constraints. Second, the model disentangles the dual mechanisms through which water scarcity affects household location decisions: the direct impact on household utility and the indirect effect through housing rents. The findings indicate that households require substantial wage compensation to live in water-scarce regions. On average, they expect a 0.06% wage increase for each additional cubic meter of unmet annual water demand annually. This compensation is higher among households over 40 as well as homeowners. Importantly, the analysis reveals that the direct utility effect plays a more significant role than the indirect effect in shaping household location decisions. [link]
Presentations:
Eastern Economics Association (EEA) Annual Conference, New York City, NY, February 21-February 23, 2025.
Penn State Energy and Environmental Economics and Policy Initiative Seminar, State College, PA, September 18, 2024.
Annual CU Environmental and Resource Economics Workshop, Vail, CO, September 13-September 14, 2024.
Agricultural and Applied Economics Association (AAEA) Annual Meeting, New Orleans, LA, July 28-July 30, 2024.
Western Economics Association International (WEAI) Annual Conference, Seattle, WA, June 29-July 3, 2024.
Annual Conference of the Association of Environmental and Resource Economists (AERE), Washington D.C., May 29-May 31, 2024.