Incentivizing interdependent resource management: watersheds, groundwater, and coastal ecology

Managing water resources independently may result in substantial economic losses when those resources are interdependent with each other and with other environmental resources. We first develop general principles for using resources with spillovers, including corrective taxes (subsidies) for incentivizing private resource users. We then analyze specific cases of managing water resources, in particular the interaction of groundwater with upstream or downstream resource systems.