Where water is scarce but demand is growing, water markets offer an opportunity to in-crease economic efficiency by enabling the reallocation of water among users and sectors. While buyers and sellers willingly enter into such transactions, indirect impacts on agricultur-al communities can be devastating, as intersectoral transfers may substantially alter the nature of the community’s underlying economy. This study investigates the potential economic impacts of irrigation water transfers on Uvalde County, Texas, accounting for the indirect and induced effects that crop mix changes have on agricultural input industries and labor, as well as positive impacts resulting from the influx of water permit payments into the local economy. Results from modeling these impacts using locally-produced crop budgets versus the model’s aggregate production functions are compared. Overall we find that water transfers negatively affect the county’s employment, labor income, and output significantly, and that labor income changes are particularly sensitive to the use of crop budgets as opposed to aggregate production functions.


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