The Effect of Regulation Uncertainty on Water-Right Prices: The Case of the Loa Basin in the Antofagasta Region of Chile
Gonzalo Edwards; Óscar Cristi; Carlos Díaz.
Documento de Trabajo IE-PUC, N° 421, 2012.
Abstract: This paper analyzes institutional arrangements that impose barriers to voluntary water transfers in the Loa basin, in northern Chile, and their impact on water prices in the market. We focus on restrictions imposed by the Chilean Water Authority (Dirección General de Aguas: DGA). These affect changes in water-diversion location and changes in the nature or type of water use. We hypothesize that these restrictions help explain why mining companies instead of acquiring additional water rights in the market prefer desalination, in spite of the high relative prices. With data for the Antofagasta Region, in Northern Chile, we provide evidence to support this hypothesis.
Keywords: Desalination, Water Markets, Water Rights, Water Regulation.
JEL: Q13, Q15, Q25