On the spatial nature of the groundwater pumping externality

Nicholas Brozović, David L. Sunding, David Zilberman

Research output: Contribution to journalArticlepeer-review

112 Scopus citations


Most existing economic analyses of optimal groundwater management use single-cell aquifer models, which assume that an aquifer responds uniformly and instantly to groundwater pumping. In this paper, we develop an economic model of groundwater management that explicitly incorporates spatial dynamic groundwater flow equations. Calibration of our model to published economic studies of specific aquifers demonstrates that existing studies generally incorrectly estimate the magnitude of the groundwater pumping externality relative to spatially explicit models. In particular, for large aquifers with surface areas of thousands of square miles, the marginal pumping externality predicted by single-cell models may be orders of magnitude less than that predicted by a spatially explicit model, even at large distances from a pumping well. Conversely, for small aquifers with areas of a few hundred square miles or less, single-cell models reasonably approximate the pumping externality. Application of single-cell models to inappropriate settings may result in misleading policy implications due to understatement of the magnitude and spatial nature of the groundwater externality.

Original languageEnglish (US)
Pages (from-to)154-164
Number of pages11
JournalResource and Energy Economics
Issue number2
StatePublished - Apr 2010
Externally publishedYes


  • Common property resource
  • Dynamic optimization
  • Groundwater

ASJC Scopus subject areas

  • Economics and Econometrics


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