1.Comparing Alternative Policy Interventions for Modification of Subsidized Energy: The Case of Groundwater Pumping for Irrigation ( Journal of Hydrology. October 2018)

This paper analyzes the responses of profit maximizing groundwater users to modifications (elimination, reduction, decoupling) of the subsidy to electricity used for water pumping. The paper develops a theoretical model and derives general results for a simplified case of homogeneous set of users. The model is applied to aquifers in Leon, Guanajuato, Mexico and in Kern County California. In particular the performances of the two traditional policy intervention measures—elimination and reduction of the subsidy—are compared to a new, innovative policy intervention mechanism—decoupling the subsidy from the electricity bill—said to be politically more acceptable. The results suggest that the rate of water pumping and water level in the aquifer, which are undesirable with the existing electricity subsidy, can be improved by changing the subsidy structure, with a substantial improvement in social welfare. Furthermore, decoupling represents a politically feasible alternative to solving the overexploitation of groundwater due to electricity subsidies in some regions.

2. Behavioral Responses to Reforming Electricity Subsidies for Pumping Groundwater: Evidence from Laboratory Experiments (Journal of Behavioral and Experimental Economics,Volume 68, June 2017. pp 41-52)

The use of subsidies to support agricultural activities is a widely common practice among developed and developing countries. It is also generally accepted that many of these subsidies have negative effects on the environment. However, the political economy of subsidies makes them very difficult to modify or eliminate. This paper intends to analyze the behavioral responses of groundwater users when they face a change in the subsidy. Our main focus is the case of Mexico, where a subsidy to electricity for pumping groundwater for irrigation purposes was introduced in 2004 in an effort to make agricultural production more competitive with NAFTA. We develop a theoretical dynamic optimization model, then generate computer simulations that allow us to draw hypothesis that are then tested with subjects in the laboratory. The hypothesis suggest that under subsidy modifications (reduction and decoupling the subsidy from the electricity price) a reduction in the water withdrawals is achieved contributing to the stabilization of the over-drafted aquifers.

3. Alternative Policies to Manage Electricity Subsidies for Groundwater Extraction: A Field Study in Mexico (Journal of Behavioral Economics for Policy, Volume 2, 2018)

We designed a series of field experiments to study the behavior of farmers under alternative electricity subsidies for extracting groundwater. Users’ water pumping decisions are based on the price of electricity, level of subsidy, and height of the water table. The paper opens with a brief description of common pool resource dilemmas and the value of field experiments in the analysis of such issues. It then describes the model used to draw predictions. We analyze the theoretical effectiveness of three policy interventions: elimination, reduction, and decoupling—an innovative policy that substitutes the electricity subsidy for a cash transfer. Results from the experiments conducted in the city of León, Guanajuato, México, suggest that all three policy interventions sustain positive effects on the pumping level: Elimination has the largest effect, whereas reduction results in only a marginal effect on the rate of water extraction. Decoupling proves to be a viable policy, as it produces an effect similar to elimination while avoiding political and social damage. We then compare these results with lab experiments conducted in the United States.

4. Administración de agua subterránea: Análisis de la Tarifa 09 y posibles alternativas regulatorias. (Undergraduate Thesis)