Water Markets and Farm Dynamics in the Murray–Darling Basin
Work in progress · draft coming 2027
Australia's southern Murray–Darling Basin runs one of the world's largest water markets. Farmers trade both seasonal allocations and permanent entitlements of differing reliability. I build a dynamic model of irrigated farms that choose crops, water use, entitlement holdings and borrowing under uncertain allocations, with perennial crops that must be watered to survive drought. Prices for allocations and entitlements clear in equilibrium. I estimate the model with field-level land-use data from CSIRO and Victorian entitlement market records, and use it to measure the producer surplus of different water market designs.
