The Institutional Costs of Adaptation: Agricultural Drainage in the United States

Tile drainage was first demonstrated in the United States in 1835 as a method to adapt agriculture to excessive water in soils. Subsequently, innovations in coordinated drainage enterprises, engineering, and tile manufacture led to drainage over large portions of the U.S. Midwest and Southeast. Of the 215 million acres of wetlands estimated to have existed in the contiguous United States at colonization, 124 million have been drained, 80-87% for agricultural purposes. In this paper we argue that a key institutional innovation, the drainage management district, facilitated local investment in drainage. States in our sample adopted drainage laws between 1857 and 1932, and after adoption each state saw an increase in improved agricultural land in counties with poorly drained soils relative to well drained counties. We estimate artificial drainage increased the value of agricultural land in each of the worst-drained counties of the eastern United States by 13.5-30.3%, a total increase in these counties of $7-17B (2020 dollars). With the increasing likelihood of extreme precipitation events across the entire U.S., technical innovation in drain tile will be a key component of adaptation to climate change. Our paper points as well to the importance of institutional innovation and its associated costs.