Effects of Water Supply on Labor Demand and Agricultural Production in California's San Joaquin Valley

Abstract

We estimate the effect of changes in water deliveries from large projects on agricultural production. We estimate a region-scale, multi-output production model of the San Joaquin Valley of California using observed historical data. The model incorporates seven crop outputs and the labor input as functions of project water supply, groundwater pumping price, other surface water sources, wages, and crop prices. We find that: (1) reduced irrigation water supply reduces the demand for farm labor and the production of some crops, (2) regional production mix tends to shift towards cotton when water supply is high and (3) some structural change has occurred over the course of our 22 year study period, with production of annual crops becoming more sensitive to changes in project water supply and labor becoming less sensitive to local surface water conditions.