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Abstract
California is facing a severe water crisis. Water resources allocation creates conflicts among urban
users, farmers, and environmentalists. Large diversions of water for agriculture and urban uses
restrict habitat for native fish species contributing to the fish population collapse in the Sacramento-
San Joaquin Delta. Efficiently allocating water between water uses is a current policy priority.
The Yolo Bypass floodplain, located in the Delta, is at the center of the debate. It provides
unique habitat to native fish species, agricultural production, and flood protection to the city of
Sacramento. The seasonal flooding of Yolo Bypass provides critical habitat to Chinook salmon.
Yet, it may conflict with agricultural production, in particular rice farming. Managing Yolo Bypass
for the joint production of wildlife and crops is critical to achieve efficient water allocation and
species conservation objectives.
We develop a model that captures the marginal benefit to the commercial Chinook fishery and
the opportunity cost to Yolo Bypass agriculture. Habitat provision affects both the crop yields and
the fish stock—through greater survival rate of the juvenile Chinook salmon that use the inundated
floodplain. We explicitly model how these two activities are affected by the habitat and allow
for feedback between the fishery and agricultural production models such that crop acreages and
harvest are endogenous to the model. The question presents a unique challenge for economists
because the spatial and temporal scales of these models differ widely. While economic models can
be aggregated for estimation and are normally predicated on yearly cropping decisions, biological
models are sensitive to habitat variation over short distances and weekly, if not daily, changes. Our
model uses a calibration approach to formally model the opportunity cost to agriculture.