Rural-Urban Water Transfers with Applications to the U.S. Mexico Border Region

Drawing from empirical cases in the U.S.-Mexico border region, this paper examines large-scale rural-urban water transfers between irrigation districts and municipal providers as bargaining games. The role of contingency contracts to address urban water demand uncertainty is examined. Particular attention is paid to the role of irrigation technology on bargaining outcomes. Technology subsidy programs have been instituted to facilitate transfers, conserve water, or both. Yet, increases in efficiency can have unintended effects that discourage transfers and conservation. Numerical simulations based on the largest rural-urban water transfer agreement in U.S. history are used to examine the role of technology in environmental mitigation requirements for transfers.