Dallas Fed: Water scarcity could impede Texas economic growth

But water markets could help ensure state’s water goes to most productive uses, says Southwest Economy

For immediate release: December 3, 2013

DALLAS—The fourth-quarter issue of the Federal Reserve Bank of Dallas’ Southwest Economy includes articles on Texas’ water consumption, the Texas petrochemical industry, Texas and Louisiana’s economic ties and return migration to Mexico.

Water scarcity could impede Texas’ economic growth, say Keith Phillips, Edward Rodrigue and Mine Yücel in “Water Scarcity a Potential Drain on the Texas Economy.”

Agriculture represents a small fraction of the Texas economy, but uses the most water, the authors note. In 2011, farmers accounted for 61 percent of the state’s water consumption.

As the state becomes more urban, competition for water is increasing, the authors state. Water markets—which would allow cities and industries to buy water from the agricultural sector as demand increases—would ensure that Texas’ water goes to the most productive uses.

“Through market prices, people discover for which ‘needs’ they’re willing to pay,” the authors write. “Some may find that high prices preclude miles of irrigated cotton or lush St. Augustine lawns.”

Phillips is a senior research economist and advisor, Rodrigue was a research intern and Yücel is senior vice president and director of research.

In “Shale Revolution Feeds Petrochemical Profits as Production Adapts,” business economist Jesse Thompson finds booming shale energy production has drastically lowered prices for natural gas and natural gas liquids (NGLs) and made the petrochemical industry in both the U.S. and Texas highly profitable and globally competitive.

The boom should benefit the Texas economy for years to come, with several new petrochemical plants planned along the Texas Gulf Coast.

Texas’ Eagle Ford Shale was likely responsible for producing at least 20 percent of all NGLs in the United States from January to August of 2013, Thompson notes.

In “Barbecue vs. Gumbo: Economic Traits Tie Neighboring Texas and Louisiana,” senior research economist and advisor Jason Saving and senior writer/editor Michael Weiss find Texas and Louisiana policymakers face many common challenges, including improving and expanding education systems in their states.

The short-term pressure on improving education is somewhat less in Texas due to the large number of both high-and low-skilled immigrants in the state, the authors say.

Louisiana, with less domestic in-migration and relatively few immigrants, faces more immediate pressure to improve its K–12 education system, or watch jobs leave for neighboring areas, Saving and Weiss state.
In an “On the Record” conversation, Agustín Escobar Latapí says migrants have returned to Mexico from the U.S. in record numbers in the wake of the 2008–10 economic downturn and slow recovery.

In addition to the slow recovery, increased enforcement of immigration laws has kept return in migrants in Mexico, according to Latapí.

Latapí is a research professor at the Center for Research and Higher Learning in Social Anthropology in Guadalajara, Mexico, and is a member of Mexico’s National Academy of Sciences.

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Media contact:
Alexander Johnson
Phone: (214) 922-5288
Email: alexander.johnson@dal.frb.org