Understanding Rural‐to‐Urban Water Transfers: An Agent‐Based and Input‐Output Modeling Approach

Abstract Growing societal water demands and decreasing water supplies are straining the water available for communities in many basins. Once water supplies have been fully allocated and developing new water supplies is infeasible, the best option to meet growing water demands is often to reallocate water from rural agricultural water uses. Yet, the dynamics and implications of these rural‐to‐urban water transfers are poorly understood. Here, we integrate an agent‐based model with an input‐output model to capture the behavior of individual irrigators and examine how their water transfer decisions propagate through the broader rural economy and shape social dynamics. As a demonstration of our model, the rural community represents Alamosa County while the city represents the city of Denver, both located in Colorado, Unites States. We find that the greatest long‐term decline in crop water use corresponds with higher city growth rates while the greatest short‐term decline corresponds with larger farmer discount rates. As farmers sell their water rights to the City, economic activity from the crop production sector declines, causing unemployment in the crop production sector to increase and demand from the service sectors to decrease, which results in output declining in these economic sectors as well. Thus, a negative impact on the agricultural sector will cause some negative impact on other economic sectors, such as professional, health care, and recreational services. This research brings new insights that can be used to evaluate the socio‐economic impacts of water transfers and shape policy to minimize potential negative externalities associated with water transfers.