Historically, States in the Western USA struggled to document, measure and enforce ‘water rights’. As a result, legal risks and transaction costs have deterred users from trading water to where it has the highest value. States have attempted to resolve this through ‘General Basin Adjudication’, a process in which a judge formally verifies which individuals have valid rights and their entitlements.

I evaluate the impact of one such adjudication using a novel combination of administrative water right data, and remotely-sensed data on crop choice, evapotranspiration, soil and climate characteristics. The Snake River Basin Adjudication in Idaho adjudicated over 139,000 Water Rights at a cost to the State of over $94 million between 1987 and 2014. I use differences in the timing of adjudication between sub-basins to identify the short run impacts of adjudication.

Adjudication leads to a 140% increase in the frequency of water right trading. These trades move water rights to land which is relatively more productive, and lead to an increase in total crop acreage.

I estimate the value created by this adjudication with a logistic regression model of crop choice. I monetize my estimate with demand parameters estimated from responses to changes in crop insurance prices. I find that adjudication increased agricultural output by up to $250 million per year. The increase in trading after adjudication accounts for one fifth of this value.