The Economic Benefits of Water Rights Adjudication: Evidence from Agricultural Land Sales in Western States

Water is an essential but increasingly scarce resource, especially in the Western U.S., where climate change and institutional fragmentation make efficient water regulation challenging. Adjudication, a legal process to formalize and clarify water rights, has emerged as part of efforts to establish clearer and enforceable rights. Despite its potential economic and environmental benefits, empirical evidence of the impacts of water rights adjudication remain limited. In this paper, I examine the effects of irrigation water rights adjudication on agricultural land and rural home values in Idaho. Using a repeated sales sample and a newly compiled water rights dataset, I employ a hedonic pricing model to estimate capitalization effects of adjudicated appurtenant irrigation rights. The main findings how that adjudicated rights significantly increase land value. The treatment effect evaluated at the sample mean implies an increase in a parcel’s land value by $381 per acre. Moreover, adjudication effects are highly heterogeneous. Parcels with more senior or larger rights gain more from this process. In particular, downstream senior water users experience the largest benefits from adjudication. These findings suggest adjudication can enhance the market value of water but also introduce distributional concerns that should be carefully considered in the design of future water policies.