Left in the Dust? Environmental and Labor Effects of Rural-Urban Water Sales

CEnREP Working Paper No. 21-005


Growing urban populations and shifting precipitation patterns under a changing climate motivate the flexible use of markets to reallocate water in arid regions. To understand the effects of these markets, we examine the United States’ largest ever agriculture-to-urban water transfer, from Imperial County to San Diego County, California. A general equilibrium water trade model is used to illustrate the tradeoff between job preservation and environmental protection trade policies. Using a synthetic control and event study approaches, we find initial declines in agricultural output and labor under fallowing, which protected environmental water. Policy changes increasing the intensity of agricultural water use subsequently decreased inflows to the Salton Sea, exposing areas of fine-silted lakebed, creating additional dust. Dust-related air pollutants, PM10 and PM2.5, increase during the relevant period while placebo non-dust pollutants, Ozone and NO2, do not.

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