Understanding how to manage water scarcity effectively is critical for current and future generations, as competition for this vital resource is only expected to intensify. This dissertation explores two key aspects of water scarcity: the potential of cloud seeding as a tool to increase water availability and the decision-making processes of smallholder farmers facing water constraints.In the first chapter, I examine the economic impact of cloud seeding programs on both target and downwind areas, through a theoretical framework of welfare economics and spatial externalities. I use state-of-the-art causal inference methods to estimate the effects of 12 long-running cloud seeding projects in California on precipitation. I find that cloud seeding increases monthly precipitation totals by 57% in the target areas, with significant differences in effectiveness between projects, ranging from 30% to 140%. The additional surface water costs between $3.7 to $24.5 per ac-ft, depending on the project. Perhaps more importantly, I find that cloud seeding has a significant negative effect on downwind areas. I estimate an 8% decrease in monthly precipitation, generating a possible loss of $49 million in surface water for Nevada. Results provide guidance on the contexts in which cloud seeding programs may be viable, along with estimating potential deleterious impacts to neighboring communities.In the second chapter, I conduct a case study of cloud seeding in Santa Barbara County, California. This is the first paper that examines the effects of cloud seeding methods separately. Utilizing high-resolution data, I show that cloud seeding operations increase precipitation by 26-49% per operation, with an average cost of $6.5 per acre-foot. I further differentiate between ground-based and aerial seeding methods, providing valuable insights into their relative effectiveness within thesame program. This underscores the importance of operational details when considering cloud seeding as a water management strategy.In the third chapter, I shift focus to agricultural decision-making in developing countries facing resource constraints. I examine the effects of agricultural extension and irrigation schemes on the joint choices of irrigation adoption and crop selection by smallholder farmers in Ethiopia. I develop a theoretical framework that incorporates both profit maximization and subsistence needs. Using household survey data, I find that subsistence needs significantly influence crop choice, with farmers prioritizing crops for household consumption. While extension services encourage cash crops, they may discourage riskier options like fruits. Irrigation adoption is limited, despite its potential to mitigate rainfall variability. These findings highlight the complex decision-making processes of smallholder farmers in water-scarce environments and emphasize the need for policies that consider both food security and economic opportunities.
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