Santiago Truffa

Ph.D Business Administration

Playing Checkers in Chinatown

Abstract – In 1905-1935, the city of Los Angeles bought the water and land rights of the Owens Valley
farmers and built an aqueduct to transfer the water to the city. The dark story is that Los
Angeles bullied and isolated reluctant farmers to get cheap water. A map of the farmers ́ plots
sold in any given point in time, however, would look like a checkerboard either because the city
is intentionally targeting specific farmers, whose sale would create negative externalities in the
remaining farmers, or because the farmers were heterogeneous. We analyze the bargaining
between the city and the farmers and evaluate the effects that farmers’ actions had on one
another, to assess the checkerboarding claim. We estimate a dynamic structural model of the
farmers’ decision on selling to the city. We found that there are large externalities when farmers
sold. The externalities were larger for neighboring farmers, and when the selling farmer was
closer to the river.

with Jose Antonio Espin Sanchez

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