The agricultural sector is the primary water consumer in the US. Groundwater is one of its main sources, with 65% of irrigated farmland relying on groundwater for their water supply. Groundwater use presents a common pool problem: if a farmer pumps groundwater, she decreases the aquifer's water table and thus increases the cost of pumping for farmers in the same aquifer. Studying such a problem is challenging due to a lack of markets and data on groundwater use. In this paper, I leverage detailed farmer-level data on (ground)water use, crop choices, and crop yields to study the equilibrium implications of the current groundwater costs. I focus on the Ogallala Aquifer in Nebraska. In order to estimate the effect of water costs on water use and crop choices, I combine a crop-growth model with an economic model. I use the crop-growth model to recover the precise relation between water use and crop yields. I use the economic model to estimate the marginal cost of water for farmers. I then quantify how farmers respond to water costs by switching which crop they plant or changing the water use per planted crop. I find that farmers are inelastic to water costs: a 10% increase in the water cost would decrease water use by 3%. Moreover, I find that farmers adapt to higher water costs by both reducing the water use per planted crop and fallowing the land. Lastly, I utilize my estimates to compute the optimal and sustainable tax on groundwater use.
Since 2010, the Uruguayan government has fostered the installation of solar panels among households and firms to promote small-scale renewable electricity production. Under this policy, agents with solar panels are allowed to feed any electricity surplus into the grid. We study the economic and environmental consequences of this policy. We collect a novel dataset on electricity extraction and injection into the grid at a household/firm level for the whole country. First, we find that installing a solar panel reduces the electricity extracted from the grid. Second, we find that it increases the electricity injected into the grid. Third, we find that it reduces CO2 emissions by 0.15% with respect to the baseline. Fourth, we find evidence of a rebound effect: electricity consumption after the solar panel installation increases between 20% and 26%. Lastly, we propose an alternative policy that allows agents to store their electricity surplus in batteries instead of immediately injecting it into the grid. This policy would reduce CO2 emissions by 2.7%, allowing electricity injection into the grid at night when fossil-fuel facilities satisfy most of the electricity demand. We leverage household and firm-level data to study the effect of a net-metering policy on electricity extraction and injection, showing what countries can expect from implementing such a policy.
We study the effect of weather shocks on legal and illegal migration from rural Mexico to the US. First, we find that shocks in the wet season on precipitation and temperature increase migration. The increment is entirely driven by illegal migrants. Second, we propose a mechanism to explain this result: the effect of weather on agricultural production. We find that shocks on precipitation and temperature decrease total harvested land and corn production. Third, we show that young and unwealthy workers are more sensitive to weather shocks. Lastly, we use climate projections to have a first glance on the impact that climate change will have on migration. We find that a shift of the size of climate change would double the number of illegal migrants. Since climate change will increase the frequency and intensity of weather shocks, our findings are increasingly relevant.