Economic Impacts of Groundwater Restrictions in Wisconsin’s Central Sands
Department of Agricultural & Applied Economics
University of Wisconsin - Madison
Wednesday, October 4, 2017
Taylor-Hibbard Seminar Room (Rm103)
12:00 pm-1:30 pm
Groundwater withdrawals for agricultural irrigation have more than doubled between 1985 and 2010 in the Central Sands of Wisconsin. Local water shortages in lakes and streams have prompted policy discussion on groundwater allocation restrictions for irrigators. Using county level economic data and spatial data on high capacity well groundwater withdrawals, I quantify the regional consequences of a range of water withdrawal restrictions for agricultural sectors, basing the analysis on a calibrated multi-sectoral, multi-regional computable general equilibrium model. I use the model to evaluate economic mechanisms which could improve water and factor utilization in the production of agricultural goods. Restrictions produce heterogeneous employment and welfare impacts across counties, depending both on the level of agricultural activity and the policy instruments used to ration water use. Command and control type regulations are expensive relative to market based mechanisms, though overall costs are small. Long run losses in aggregate GDP range up to approximately 0.1%, or $10 million across re-allocation mechanisms for reductions in groundwater withdrawals to levels comparable to those in 1985.