Does Agriculture Generate Local Economic Spillovers? Short-run and Long-run Evidence from the Ogallala Aquifer

Agricultural development may support broader economic development, though agricultural expansion may also crowd-out local non-agricultural activity. On the United States Plains, areas over the Ogallala aquifer experienced windfall agricultural gains when post-WWII technologies increased farmers' access to groundwater. Comparing counties over the Ogallala with nearby similar counties, local non-agricultural sectors experienced only short-run benefits. Despite substantial persistent agricultural gains, there was no long-run expansion of local non-agricultural sectors and there are some indications of crowd-out. With the benefit of long-run historical perspective, supporting local agricultural production does not appear to generate local economic spillovers that might justify its distortionary impacts.