Abstract: This study develops a theoretical model of a risk-averse farmer’s land irrigation decision when her water allotment is subject to stochastic curtailment under the priori appropriation doctrine. The model explicitly characterizes water rights and uncertainty in irrigation water supply. By combining an array of comprehensive data files on irrigation water rights, water supplies, and agricultural land use from eastern Idaho, this study also empirically investigates redistribution of water shortage risk among farmers with different water rights priorities. Results indicate that a more left-skewed distribution of streamflow significantly discourages land irrigation among farmers except the most senior rights holders. Under the appropriative water rights, the macroscale hydroclimate risk is passed mostly on to junior water rights holders. Groundwater banking can help junior rights holders mitigate the economic loss caused by water stress.

Biosketch: Dr. Man Li is currently a research fellow at the Environmental and Production Technology Division, International Food Policy Research Institute (IFPRI). Her primary research fields are natural resource and environmental economics, agricultural economics, and development economics, with special interests in the nexus of food, water, and energy systems, including land-use based sustainable development, water resource management, climate change, mitigation, and adaptation. Some of her publications appeared in the profession’s leading journals, including the American Journal of Agricultural Economics, Water Resources Research, Land Economics, Environmental and Resource Economics, Ecological Economics, and World Development. Dr. Li holds a Ph.D. in Agricultural and Resource Economics from Oregon State University.