My dissertation research compares the use of different policy instruments to manage groundwater for agriculture. Groundwater is an important input for irrigated agriculture; it acts as a buffer to variability in surface water supplies. Because we expect to see more variability in precipitation due to climate change, groundwater management is important for both short-run drought response and long-term climate change adaptation. My research blends theoretical modeling of groundwater use and trading with an empirical investigation of the price elasticity of groundwater demand to assess the potential of market-based instruments.
Job Market Paper
Cap and trade is one possible strategy for managing groundwater. However, concentration of permits among a handful of buyers or sellers is a concern in this setting. Since many water agencies restrict the export of groundwater outside basin boundaries, future groundwater markets will likely be spatially isolated. The exercise of market power may be a defining component of these markets due to the presence of large grower-shippers, the formation of coalitions among buyers or sellers, and/or competition among a few water agencies on a shared basin. Market power in trading will decrease the gains from trade and could have significant implications for the distribution of benefits from groundwater markets.
With an application to a groundwater basin in southern California, I develop a theoretical and simulation model of groundwater trading to estimate the magnitude and distribution of the gains from trade relative to command and control. Within this framework, I show how the gains from trade change as market conditions and market structure vary. Importantly, the price elasticity parameter used to calibrate the model is generated with a fixed-effects econometric model that utilizes well-level panel data on groundwater extraction and exploits temporal and cross-sectional variation in extraction prices. Results based on linear groundwater demand curves show that gains from markets are large, despite potential losses from market power. Economic surplus with trade can be over three times greater than that under command and control.
Bruno, Ellen. 2017. “California’s New Groundwater Law and the Implications for Groundwater Markets.” ARE Update 20(4):1-4. University of California Giannini Foundation of Agricultural Economics. (Link)
Bruno, Ellen. 2015. “Coping with Future Water Woes in the Western United States” Eos 96. (Link).
Grants & Awards
2017 – 2018 UC Water Challenge Grant $60,000
“Sustainable Groundwater in California: Managing Water Use with Economic Instruments” (with Katrina K. Jessoe, Richard J. Sexton, and W. Michael Hanemann)
2017 Outstanding Graduate Paper Award, Western Agricultural Economics Association
2017 Giannini Foundation of Agricultural Economics Grant $27,000
“Managing Agricultural Water Use for Sustainable Groundwater in California” (with Katrina K. Jessoe and Richard J. Sexton)
2017 Giannini Foundation Agricultural Economics Graduate Student Fellowship
2014 – 2016 National Science Foundation Integrative Graduate Education & Research Traineeship in Climate Change, Water, and Society
2013 Joel Dean Award for Excellence in Management Science, UC San Diego