Security of Property Rights and Long-Term Agricultural Investments: Drought, Water Rights, and Perennial Cropping Decisions in California
AbstractSecure property rights over land have been shown to be important in enabling farmer to make
investment decisions that improve long-term productivity. In arid environments, access to water
might be as important as land in determining the value of investments to farmers, but the value
of secure water rights has been less widely investigated. Given climate change is expected to
increase both crop water requirements and the variability of rainfall, understanding how
property rights over water affect investment decisions on irrigated land is important for
understanding climate change impacts and the margins of adaptation available to farmers. In this paper, we test whether secure access to water affects the decision to switch into perennial crops using a 20-year dataset of cropping decisions in all 13,000 plots in Kern County, California. Perennial crops such as stone fruits, tree nuts, and citrus are typically high-value, but incur large up-front establishment costs that pay off gradually over the life of the tree. These investments are thus highly exposed to fluctuations in annual rainfall that affect the availability of surface irrigation water. Irrigation districts in Kern County obtain water from a variety of sources including both long-distance transfers along aqueducts from northern California and the local Kern River. These sources are differentially exposed to physical water scarcity during dry years meaning farmers in some areas have more secure access to water, making the decision to grow perennials a less risky option. This paper will use irrigation district boundaries in a regression discontinuity design to test how access to water has affected cropping decisions.