Do Property Rights Alleviate the Problem of the Commons? Evidence from California Groundwater Rights Andrew B. Ayres Kyle C. Meng Andrew J. Plantinga NBER Working Paper No. 26268

Issued in September 2019, Revised in January 2020

NBER Program(s):Environment and Energy Economics, Public Economics

Property rights are widely prescribed for addressing overextraction of common pool resources, yet causal evidence of their effectiveness remains elusive. We develop a model of dynamic groundwater extraction to demonstrate how a spatial regression discontinuity design exploiting a spatially-incomplete property rights regime recovers a lower bound on the value of property rights. We apply this estimator to a major aquifer in water-scarce southern California and find that the introduction of ground- water property rights generated substantial net benefits, as capitalized in land values. Heterogeneity analyses suggest gains arise in part from tradeability of these rights, which enables more efficient water use. You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery. Access to NBER Papers You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy. If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access. E-mail:

Acknowledgments Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w26268