Collective Action by Contract: Prior Appropriation and the Development of Irrigation in the Western United States

Bryan Leonard, Gary D. Libecap

NBER Working Paper No. 22185
Issued in April 2016, Revised in April 2017
NBER Program(s):Development of the American Economy, Environment and Energy Economics, Law and Economics

We analyze the economic determinants and effects of prior appropriation water rights that were voluntarily implemented across an immense area of the US West, abruptly replacing common-law riparian water rights. At the same time and place, vast private irrigation infrastructure added to the US capital stock. We build upon Ostrom and Gardner (1993) and model irrigation as a coordination problem to show how prior appropriation facilitated greater private infrastructure development than was possible under the baseline riparian system by i) securing access to water against future entry and ii) defining a property right that formed the basis for contracting around collective action problems among numerous, heterogeneous agents. We construct a dataset of 7,800 rights in Colorado, established between 1852 and 2013 including location, date, size, infrastructure investment, irrigated acreage, crops, topography, stream flow, soil quality, and precipitation to test the predictions of the model. We find that prior appropriation facilitated cooperation, doubling infrastructure investment and ultimately contributing between 3% and 21% of western state income in 1930. These outcomes are relative to the baseline alternative of a riparian system. The analysis reveals institutional innovation that informs our understanding of the development of property rights, prior appropriation, and contemporary water policy.

download in pdf format
   (1605 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22185

Users who downloaded this paper also downloaded* these:
Brewer, Glennon, Ker, and Libecap w13002 Water Markets in the West: Prices, Trading, and Contractual Forms
Hsiang w22181 Climate Econometrics
Hansen and Ohanian w22122 Neoclassical Models in Macroeconomics
Libecap w16324 Institutional Path Dependence in Climate Adaptation: Coman's "Some Unsettled Problems of Irrigation"
Dupont and Rosenbloom w22184 The Impact of the Civil War on Southern Wealth Holders
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us