ABSTRACT
In the western United States, where fresh water has long been a scarce resource, water markets provide a mechanism for reallocating rights to use water in response to temporary shortages and longer-term shifts in economic activity. Although market-based transfers have occurred since the nineteenth century, policy interest in the market has grown over the past few decades. Faced with rapid population growth, overdrafted groundwater basins, and financial and environmental limits on the development of new surface water reservoirs, many states now view market-based reallocation as an integral component of modern resource management.
