Reallocating Water from Agriculture to the Environment under a Voluntary Purchase Program

Pressure is increasing to reallocate water from agriculture to the environment. This article examines the performance of a federal program in Nevada's Lahontan Valley under which water rights are purchased from willing sellers for environmental restoration. Based on a data set combining information on growers' personal and financial characteristics with physical characteristics of their farms, a model is estimated that explains who sells their water rights to the government. Results indicate that personal characteristics, especially short-term financial constraints, have a powerful influence on the sales decision. This finding suggests that the environmental agencies may wish to more actively target growers operating on poor quality soils or on the periphery of irrigation projects to attain a more efficient outcome.