The sustainable management of groundwater resources for use in agriculture is a critical issue worldwide. Many of the world’s most productive agricultural basins depend on groundwater and have experienced declines in water table levels. The food consumers eat, the farmers who produce that food, and the local economies supporting that production are all affected by the availability of groundwater. Increasing competition for water for cities and for environmental needs, as well as concerns about future climate variability and more frequent droughts, have caused policy makers to look for ways to decrease the consumptive use of water. In this chapter, we discuss the economics of sustainable agricultural groundwater management, including the importance of dynamic management; the importance of spatial management; the possible perverse consequences of incentive-based agricultural groundwater conservation programs; property rights; the groundwater–energy nexus; and the effects of climate change.

JEL classifications: Q15, Q30, Q25