Economic Impacts of Water Reallocation: A CGE Analysis for Walker River Basin of Nevada and California

This study uses a regional computable general equilibrium (CGE) model to examine the impacts of reallocating water from agriculture to recreational use in rural Nevada and California. Unlike previous studies of water reallocation, this study considers water rights compensation as a positive effect in the regional economy. In addition, three different model variants are specified depending on the assumptions about interregional factor mobility. Model results show that the combined effect of water rights compensation and an increase in recreation-related expenditures does not offset reduction in agricultural production and that sectoral effects are sensitive to assumptions about interregional factor mobility.