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Examination of an implicit water rights market using hedonic estimation

Thesis/Dissertation ·
OSTI ID:6154784
Much of the current literature on water rights is concerned with the efficiency of water allocations where there are legal and institutional constraints on water rights trades. In regions where water laws and institutions permit water rights to be traded freely so that a perfectly competitive market is developed, the allocation of water among users will be efficient. This research develops an analytical approach to assessing the allocational efficiency of a regional water market. Specifically, this approach focuses on the extent to which a regional water market is separate from a land market, and competitive. The questions of separability and competitiveness are examined empirically by estimating the hedonic price function for farm real estate. Such a function relates a parcel's selling price to its attributes: quantities of land and water, value of improvements, and location. The maximum likelihood estimation procedure employs a Box-Cox transformation on the price, land, and water variables. Separability of the price function in land and water, and linearity in water, indicate that water is sold in separate and competitive markets. A likelihood-ratio test on the parameters of transformation provides the required test of separability and linearity
Research Organization:
Illinois Univ., Urbana (USA)
OSTI ID:
6154784
Country of Publication:
United States
Language:
English